© 2026The World Bank Group1818 H Street NW, Washington, DC 20433www.worldbank.org The Country Growth and Jobs Reportisa coreanalytical reportthat helpsclient countries design and implement a strategy to accelerate economicgrowth and creation of new and better jobs. ReportNo. NORTH MACEDONIA GROWTH AND JOBS REPORTEscaping the Middle-Income Trap June2026 FiscalPolicyand GrowthGlobal PracticeEuropeandCentralAsiaRegion Document of the World Bank REPUBLIC OF NORTH MACEDONIA Government Fiscal Year:January-December Currency Equivalents(Exchange Rate Effective as ofMay 12, 2026)EUR 1.00:USD 1.17:MKD 61.36 Weights and Measures:Metric System ABBREVIATIONSANDACRONYMS ACKNOWLEDGEMENTS This report is the product of the World Bank team led by Sanja-Madzarevic-Sujster, Joana Madjoska, and ArlanZandro Ilagan Brucal, comprised of(in alphabetical order)Stefanie Brodmann,Seidu Dauda, Franklin Maduko,Tatjana Markovska,Graciela Murciego,Bojana Naceva,Denisse Peirola, Marjan Petreski, Francis Ratsimbazafy,Rafael Ravnik,Dennis Sanchez Navarro,Bojan Shimbov, Jordan Simonov,Aleksandar Stojanov,Viktor Stojkoski,Corneliusvon Lenthe,and Markus Wolff,with research assistance from Costanza De AcutisandTim Pionteck.Sean Lothrop provided editorial support, whileAnita Bozinovska andMario Jankulovskiprovidedlogisticandadministrative support. The report was undertaken under the guidance ofXiaoqing Yu, Country Director, Emilia Skrok, Practice Manager,Carole Megevand, Country Manager,andRichard Record, Lead Country Economist.The team appreciated theircomments andofAndreasEberhard, Aart Kraay,Lazar Milivojevic, andEkaterina Vostroknutova,foradvicethroughout the course of this work. The team also appreciates comments received from the peer reviewersXaiverCireraand Maddalena Honorati. Contents Key Messages.........................................................................................................................................................9Overview..............................................................................................................................................................10Chapter 1. Macroeconomic features of growth and jobs..............................................................................181.1.Notable progress, but convergence slower than peers.....................................................................181.2.Structural transformation to service-based economy and suboptimal investments.....................191.3.Unemployment declined, and labor contribution to growth increased amid demographic odds231.4.Achieving high-income status while creating better-paying jobs......................................................26Chapter 2. Strengthening firm productivity....................................................................................................292.1.Patterns of productivity growth and employment dynamics............................................................292.2.FDI can boost productivity, but only when local firms are ready to absorb it.................................342.3. Misallocation is the symptom; weak governance is the underlying disease..........................................37Chapter 3. Reinforcing competition and improving business environment...............................................413.1.Constrained competition limits productivity-enhancing reallocation..............................................413.2.State ownership across many sectors appears to constrain competition and labor reallocation453.3.Public support gets more firms to start innovating, but it reduces their own investments anddoes not improve productivity.............................................................................................................................47Chapter 4. Leveraging trade to support productivity and job creation.......................................................504.1.Exports has been a great generator of jobs, but is slowing down....................................................504.2.Diversifying exports and unlocking trade in services.........................................................................524.3.Removing policy distortions could unlock trade growth....................................................................53Chapter 5. Mobilizing untapped human capital.............................................................................................575.1.Unemployment declined and job quality has improved but gains have stalled as informality andskills mismatches persist......................................................................................................................................575.2.Youth: turning education into opportunity..........................................................................................595.3.Women: unlocking the largest underutilized source of human capital...........................................625.4.Global transitions will reshape labor demand a