13. Impact of COVID-19 in North Macedonia
COVID-19 took a relatively high toll on North Macedonia’s citizens and economy. Authorities acted quickly to contain the spread of the virus, and took measures to mitigate the negative effects of restrictions on the economy. Yet, the medium- to long-term impact of the pandemic will largely depend on pre-existing socio-economic vulnerabilities. This chapter reviews the most binding of them. In particular, as a small and open economy, North Macedonia is particularly exposed to a reduction in global trade flows and financing, as well as a weakening tourism sector. The pandemic hit the hardest already vulnerable groups, the poor and the unemployed, who accounts for a large share of the population. Building resilience will depend on the strength and capacity of institutions to timely design and implement policy measures, as well as on the citizens’ trust in the public decision-making process and the efficiency of the public administration.
COVID-19 has had a relatively high health impact in North Macedonia. The first case of COVID-19 was reported on 26 February 2020. Three and a half months later (on 29 June), the economy registered 6 092 cases (2 933 cases per million inhabitants) and 286 registered deaths (138 per million inhabitants). Importantly, the situation worsened as of the end of May: the number of cases increased sharply, resulting in a new wave of contagion. As of 26 May 2021, the economy counts an accumulated 154 640 cases (or 74 454 per million inhabitants) (Figure 13.1) and the second highest number of COVID-19 deaths in the region with 5 337 registered deaths (or 2 570 per million inhabitants) (Figure 13.2).
Note: North Macedonia reported its first COVID-19 case on 26 February 2020.
Source: Authors’ own calculations based Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/coronavirus.
Note: North Macedonia reported its first COVID-19 death on 22 February 2020.
Source: Authors’ own calculations based Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/coronavirus.
Authorities in North Macedonia acted quickly to contain the spread of the virus, yet future health resilience is not guaranteed. On 18 March 2020, three weeks after the first case was announced, a 30-day nationwide state of emergency was declared, restricting public gatherings and the movement of people. As of 22 March, a curfew was put in place. The government closed all schools, cultural premises, restaurants, non-critical stores and borders. Only essential businesses, such as food stores and pharmacies, remained open. The parliamentary elections scheduled for April were postponed to 15 July. The measures led to about a 95% decrease in movements throughout the economy (Figure 13.3). As of the latest available data, North Macedonia has conducted 373 491 tests per million inhabitants since the beginning of the pandemic (Figure 13.4). Increasing testing capacity will be crucial in detecting new cases and in strengthening the economy’s health resilience. With 2 people fully vaccinated per hundred inhabitants by the latest available data, vaccine capacity in North Macedonia is the second lowest in the region (Figure 13.5).
Notes: The chart shows the relative volume of requests for directions compared to a baseline volume on 15 February 2020, as recorded by Google Maps.
Source: Authors’ elaboration based on Google (2020[2]), “Google Mobility Trends”, www.google.com/covid19/mobility/.
Source: Worldometer (2020[3]), Worldometer (database), www.worldometers.info/coronavirus. Costa Rica officially became an OECD Member on 25 May 2021, therefore it is not included in the OECD averages in the current report.
Note: Last reported numbers are from May 2021.
Source: Worldometer (2020[3]), Worldometer (database), www.worldometers.info/coronavirus.
The government has taken measures to mitigate the negative effects of restrictions on the economy. In May 2020, the government retroactively classified the measures into four packages. The first two were implemented between March and May 2020 and were intended to provide life support to the economy and to the health sector. On 17 May, the government introduced a third package, worth EUR 335 million, to boost economic recovery and stimulate consumption further. The three packages together are worth EUR 550 million or 5.5% of GDP. The fourth package, adopted on 24 September, is worth about EUR 470 million and is a direct extension of the three previous ones.
COVID-19 had significant negative effects on North Macedonia’s economy. While North Macedonia experienced a robust GDP growth of 3.6% in 2019, GDP declined by 4.5% in 2020. Private consumption declined by 5.6% and investments by more than 10%, even though they rebounded in the third quarter due to public investments in infrastructure. Government consumption increased by more than 10%. Manufacturing, construction, trade, transportation and tourism experienced were particularly affected by the reduced economic activity, while information and communication, and real estate grew. Reduced external demand, saw a fall in exports by 10.9% in 2020, but was followed by a decline in imports (World Bank, 2021[6]).
The medium- to long-term impact of the COVID-19 pandemic on North Macedonia will largely depend on pre-existing socio-economic vulnerabilities and the strength of the policy-setting institutions and their ability to implement the envisaged policy measures. Taking pre-existing vulnerabilities into account can help policy makers to determine who will need help the most and to design and target policies accordingly (Table 13.2).
Material well-being and social protection
The short-term impact of the lockdown could harm the most vulnerable, including the unemployed and people living in poverty. Despite a progressive decrease in the unemployment rate since 2015, North Macedonia entered the crisis with a relatively high unemployment rate of about 17.3%. While North Macedonia has taken measures to mitigate the negative effect of the crisis on employment (Table 13.1), unemployment is likely to increase due to business closures. Poverty remains a major challenge, and households will need adequate support in the coming months, especially those faced with loss of income.
Inadequate social assistance limits its ability to act as an automatic stabiliser. Prior to the crisis, social assistance programmes were small in scale, poorly targeted and only reduced the risk of poverty by 3.7% in 2016, half the reduction observed in the European Union. In response, the government mandated a Guaranteed Minimum Income (GMI) in 2019. However, this does not cover 75% of those likely to fall into poverty during the pandemic (World Bank, 2020[17]). Furthermore, the decline in remittance inflows may jeopardise the revenue of many households.
Health and non-material well-being
The pre-existing, comparatively poor health outcomes and inefficiencies of North Macedonia’s health system render the economy vulnerable to the current pandemic and potential new outbreaks. According to the Ministry of Health, the economy has around 1 000 hospital beds for COVID-19 cases and 4.3 beds per 1 000 inhabitants, which is a decent capacity to respond to the crisis by international comparison. The economy has 2.9 physicians per 1 000 inhabitants, slightly below the OECD average. The low healthcare spending of about 6.6% of GDP in 2017 (OECD, 2020[5]), compared to 12.6% in 2017 in OECD economies, is likely to affect North Macedonia’s capability to respond adequately to the crisis. Furthermore, health-sector revenues are very sensitive to employment and economic downturns, such as the predicted repercussions of COVID-19, since they heavily depend on payroll contributions from the population in formal employment.
Other, non-material aspects of well-being are affected by the crisis. Quality of life is also about people’s relationships, which can provide a vital lifeline during crises and social distancing. Yet, 18% of people in North Macedonia say they have no relatives or friends they can count on for help in times of need. Even before the COVID-19 pandemic, life satisfaction was much lower in North Macedonia than in the average OECD country. The considerable risks of social isolation and loneliness need to be addressed, for both physical and mental health, by policy measures (for instance, through regular check-ins by social services, civil society and volunteers) and the promotion of digital technologies for connecting people with each other and with public services (World Bank, 2018[18]).
Women and children are particularly exposed to the collateral effects of COVID-19. As in other economies, loss of employment and lockdown conditions in North Macedonia are likely to have led to increased GBV, while services and shelters for victims of violence are not operational after curfew (OECD, 2020[19]; Bami, 2020[20]). Even before the pandemic, prevailing gender norms that normalised violence against women were concerning. Some 14.5% of women in North Macedonia justified husbands hitting or beating their wives, compared to 8.0% in OECD economies (OECD, 2019[21]), while 61% of 850 women surveyed in 2005 stated that they had suffered domestic violence (World Bank, 2018[18]). Women are affected in other ways too. They make up the majority of the healthcare workforce, exposing them to greater risk of infection. At the same time, women are shouldering much of the burden at home given school closures and longstanding gender inequalities in unpaid work (see the People section in Chapter 14). The government has recently taken measures to relieve the burden. For example, on 8 April 2020, the government teamed up with local providers to expand mobile Internet access for distance learning purposes. This measure will affect 30 000 primary and secondary school students (OECD, 2020[5]).
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