Covid-19 impact and responses: North Macedonia

Updated on: 5th November, 2021

What is the current situation?

General information

Since the beginning of the COVID-19 crisis in the Republic of North Macedonia, the future is still uncertain. While the various vaccines give cause for optimism, mutations in the virus and new information from the World Health Organization about the likely persistence of the pandemic in 2021 are cause for concern. In the late summer of 2021, the country was hit by a new and strong wave of COVID-19 – in large part a result of very low vaccination rates. By October 31, 2021, 38% of our country’s entire population had been vaccinated, and 35% of the country’s population had received two doses of vaccine.

As of 3^rd November 2021, the total number of diagnosed since the beginning of the epidemic is 203.298 (~10% of the total population), the number of cured patients is 189,264, the number of deaths is 7,159, and the number of active cases is 6,875. The country is placed as the third country in the world by mortality rate per capita.

The active measures are: wearing of a protective mask in public transport, in taxis and in all enclosed spaces will continue to be compulsory; attending any event, entering shopping malls, restaurants and bars are restricted to visitors who have a certificate/confirmation of immunization (vaccination) against the COVID-19, i.e. have received two doses of vaccine; the presence of audiences at any public event is allowed up to 50% of the total capacity; the ban on large groups of public spaces has been lifted; it is now allowed to organize weddings, celebrations limited to 50% of the capacity of the space; eliminating a measure for working in shifts and remotely used.

Economic situation

The Republic of North Macedonia has made some progress and is at a good stage of preparation in developing a functioning market economy. But, the COVID-19 crisis hit the economy after years of unprecedented export growth, worsening expectations that both net exports and FDI would continue to make a positive and increasing contribution to economic growth in the short to long term. Early indications point to a significant disruption in global trade as a result of the COVID-19 pandemic. The negative impact is spreading from one country to another and from one sector to another through supply chain networks as government action to contain the spread of COVID -19 intensifies. The extent to which firms are interconnected magnifies the importance of indirect shocks relative to direct losses from the pandemic. Hit hard by the pandemic, the economy slipped into recession in 2020, with gradual recovery in 2021.

The ongoing crisis is expected to: (1) result in a short-term, but severe economic downturn; (2) put upward pressure on unemployment and poverty in R.N. Macedonia, and (3) cause social and psychological problems (a rise in domestic violence, anxiety, depression). Ultimately, the pandemic will also slow down the country’s progress in achieving the Sustainable Development Goals (SDGs) in 2020.[1]

The pandemic has had a negative impact on overall economic activity in North Macedonia. A GDP growth in 2021 is forecasted to 3.5%, compared to GDP 2020 decline by -4.5%. Exports of goods and services fell by 10.9% in nominal terms, while imports declined by 10.5%. Household final consumption decreased by an estimated 5.6% in 2020.

The unemployment rate declined throughout 2020, reaching 15.9% in the second quarter of 2021.

The government implemented a strong fiscal response to mitigate the crisis impact on households and firms. The fiscal deficit rose to 8.2 % of GDP in 2020 while the public debt level rose sharply to 60.2 % of GDP. Capital expenditure was cut in a budget revision to create space for crisis-related transfer payments. The authorities took some additional measures to improve fiscal transparency, although a fully operational state aid registry is yet to be developed.

Even with government support which by some experts and the public have been perceived as weak and inconsistent, businesses face serious and unprecedented cash flow, supply and operating problems, and the economy will not be able to return to pre-crisis levels (or the counterfactual scenario without the pandemic and without new government reforms). Cumulative output losses for 2020 and 2021 are estimated at EUR 3.7 billion. Based on more recent projections, the National Bank forecasts a 17.1% decline in exports of goods and services in real terms. Developments in the years to follow will depend on whether the government starts to undertake structural reforms and invests in green/digital transformation.

In addition, local elections and a census were conducted in the second half of 2021. The results of the local elections led to the resignation of the government and currently the state is in the process of forming a new parliamentary mayoralty to create a new government.

[1] https://www.undp.org/content/dam/undp/library/covid19/Socio-Economic%20Assessment%20North%20Macedonia.pdf

The situation with factory production

The new wave of the spread of the COVID-19 and various introduction of strict closure measures in all European countries during the autumn potentially will lead to a worldwide decline in the consumption of textile products again. The consequences of the decrease in sales throughout the European market have triggered additional challenges for Macedonian textile companies. The trend of reduction and cancellation of orders from abroad is evident in 2021, given the additional partly closures of European countries throughout the period.

Companies are expecting a potential drop in sales and additional order cancellations in the upcoming period.

The textile and garment industry accounts for 12.82% of the country’s total industrial output and covers about 10% of the country’s exports and experts say that if the government does not work harder to save this industry, the consequences will be devastating.

According to the latest research reports since the crises began in 2020; 7,000 textile workers lost their jobs, or up to 19% of the total number of textile workers are registered as newly unemployed. The most common reason for termination of employment in the textile industry is the expiration of workers fixed-term contracts. However, in 2020, this basis has increased by 123% compared to 2019. Workers on fixed-term contracts are the ones who have suffered the most. 86% of the companies recorded a decline in revenues in 2020, compared with 2019. Massive layoffs in Q1 2021 as a result of ongoing COVID-19 impacts, while 12% reported to dismissing workers.

Compensation for absence from work due to covid-19, isolation, and self-isolation due to exposure to covid-19 is covered by health insurance like any other health problem, with costs for salaries the first 15 days of absence paid by the employer with certain reductions.

What are government policies to support local businesses?

Since the beginning of the crisis COVID -19 the Government has introduced the six packages of measures to mitigate the negative impact of the pandemic on the economy, including the following measures:

Aid for the payment of wages (measure 1): this measure is further extended for the last quarter of the year. Support will be determined gradually according to the income losses suffered by the company and will vary between 14.500 (equivalent to the minimum wage in MKD; around EUR 240) and 21.776 MKD (around EUR 350). Eligible companies will be subject to a strict employment protection obligation until 31 July 2021.
Support to loans (measures 3, 4, 14, 15 and 16): Individuals and businesses will benefit from new loans, preferential interest rates, regulated penalties, state guarantees or additional delays for repayment.
Support to local consumption: payment cards (measure 2) and VAT refunds: Extension of the measure on payment cards for citizens for in-home consumption.
Measures on taxes (measures 17, 22, 23 and 27): Increases in income tax payment deadlines, lowering of tax base thresholds and the modulation of payments were announced. The Government also introduced Measures affecting VAT: (Measures 12, 18, 19 and 20) VAT will be reduced for food and beverage services (10% against the previous 18%) and craftsmanship (reduced VAT from 18% to 5%), and occasionally refunded VAT during targeted commercial actions (measure 31) “Weekends without VAT”
Reduction of Para fiscal charges (measure 8, 10 and 21): including various fees, licenses, permits.
Tourism (measures 5, 6 and 7): direct payments to tourist guides (21.776 MKD about EUR 350) and a total subsidy aid of EUR 1.9 million to travel agencies and reimbursement of the tourist tax to all operators in this sector (estimated around EUR 2 million).
Agriculture (measure 28): Support for wine production: through the purchase of grapes from the 2020 harvest, for which EUR 6.7 million is foreseen.
Catering (measure 9) “Grants to restaurants for weddings” – support will be given to all entities registered and authorized for this activity, for a total value of EUR 1 million.
Import duties (measure 26) Reduction of import duties on raw materials, provides support for the most affected processing industries, as well as an incentive for the development of processing facilities.

What are the government policies and regulations to protect employees – the workers?

In response to the crisis, the government devised measures to mitigate the socio-economic consequences of the pandemic in six successive stimulus packages.

The packages relating to workers and the labour market can be broadly divided into those aimed at:

Preserving jobs by subsidizing wages and supporting the liquidity of firms; and
Those aimed at preventing income losses and/or or compensate for income losses of citizens.

The first group included subsidies on wages and social security contributions, deferral of advance profit tax payments, loans on favorable terms (interest-free or subsidized), loan guarantees and some sector-specific aid. Two important job preservation measures were a minimum wage subsidy for companies that experienced a drop in turnover of more than 30% compared to the 2019 average during the pandemic, and a subsidy of 50% of social contributions up to the level of the average wage in the most affected sectors (tourism, hospitality and transport), both for the period April-June 2020. It is estimated that 60 thousand jobs that were at immediate risk of loss were preserved through the job preservation measures. This measure was reintroduced in the next pandemic waves in autumn 2020 and spring 2021, but with tighter eligibility criteria.

The second package of measures aimed to maintain the living standards of the most vulnerable citizens by improving access to services and relaxing the eligibility criteria for Guaranteed Minimum Assistance (GMA). The relaxation addressed ownership of a property where the household resides, a car older than 5 years, and a building plot smaller than 500 m2, all criteria that had previously excluded applicants from assistance. In addition, the income criterion was assessed based on last month’s income, not the last three months, so that households could be quickly enrolled in the GMA system after their income fell due to Covid-19. This was particularly important to provide a quick safety net, especially for informal workers. As a result of this measure, nearly 24,000 people were rescued from extreme poverty. The relaxed criteria for entry into the GMA system continued to apply in 2021. Under the second series, the government set two one-off grants for low-income earners, the unemployed, and the inactive, ranging from MKD 3,000 to MKD 9,000 in July and December 2020.

While there is limited evidence that the main employment retention and income support measures have prevented job losses and compensated for income losses among the most vulnerable, ensuring a rapid and timely recovery, protecting precarious workers, and strengthening the resilience of the labour market to respond quickly to future shocks remains a major challenge.

Companies and workers in the textile, leather and footwear industries used funds from government measures to cope with the effects of the crisis.

The protocol for preventive measures for all jobs, arising from the Plan to reduce restrictive measures to prevent the spread of coronavirus, defines activities to be undertaken in working environments:

Hand hygiene;
Respiratory hygiene;
Physical distancing (1,5-2 m in working locations);
Reduce and organize work-related trips;
Regular cleaning and disinfection of the working environment;
Communication, training and risk education;
Managing people with COVID-19 or their contacts.

The implementation of the government’s previous packages of measures to support businesses and workers was not consistently implemented by the beneficiaries. The not-so-great situation in the textile, leather and footwear industry before the pandemic, was reflected after the declaration of the pandemic in R.N. Macedonia and it deteriorated further. Government decrees, measures and recommendations were vague, confusing and it can be said that some of them were in contradiction with positive labour legislation. Only a small part of the decrees, measures and recommendations have achieved the labor market in labor-intensive and low-wage industries in a substantially positive way for workers in these industries. However, in the practice of the labour market, especially in the private sector, a number of violations occurred, especially in the area of exemption of these vulnerable categories of workers. [1]

Relevant measures from the previous Governmental set of measures to support the business sector aimed at reducing the economic damage caused by proclaiming a coronavirus pandemic – COVID 19:

1^st package introduced in March 2020: subsidizing compulsory social insurance contributions in the sectors of tourism, transport, hospitality and all other companies affected by the government measures for April, May, and June, up to 50 % of the compulsory social insurance contributions, in the amount of an average salary paid in 2019; Public Revenue Office will not undertake any additional measures and will not submit decisions on the enforced collection of all taxes and other public charges (fines, court fees), for all taxpayers who have not settled its obligations with the Public Revenue Office.
2^nd package introduced in April 2020: Government will subsidies 50% of the social contributions for employees in the coronavirus-affected firms; financial support to private companies enabling them to pay salaries in the amount of minimum wage (14,500 MKD – EUR 250) to their employees in next two months, April and May – This measure was a subject of various violation due to the fact that this measure was affecting all employees, including those which were released from conducting the work process (chronically ill, elderly, workers with child under 10 years, pregnant woman), and there are cases when the employee did not paid the minimum wage to all workers. More on this in following sections.

Workers who are laid off as a result of the crisis will get a monthly government compensation equal to 50% of their average salary in the past 24 months.

3^rd package introduced on 17 may 2020: 1 million euros will be allocated for the introduction of a digital platform for new markets for textile companies.
4^th package introduced on 27 September 2020: Support in the payment of salaries for the last quarter of the year (14,500 MKD – EUR 250), payment cards for certain categories of citizens most in need of assistance, subsidies for the most affected sectors, reduction or abolition of parafiscal charges, increase in the grace period for interest-free loans COVID-19 and additional deferral of loan repayment by companies.
5^th package introduced on 16 February 2021: Support for payment of the salaries of workers in the private sector at the level of 14.500 (minimum wage) per employee for April and May 2021 or 50% of salary contributions, which would protect a large number of jobs.

[1] https://zmai.mk/wp-content/uploads/2021/07/covid-tekstil-final.pdf

What are local stakeholders doing to lobby their government?

Various stakeholders in the country [such as the Organization of Employers of Macedonia (OEM), Business Confederation of Macedonia (BCM), Federation of Trade Unions of Macedonia and many others civil society organisations] with the support of donors (such as ILO, FES and many others) were involved in conducting various surveys to capture the challenges and needs of businesses as a result of the protracted crisis COVID -19, which helped to assess the effectiveness of the emergency economic measures implemented and to identify the type of support expected. No new reports are available for the period September – October.

What are local organisations doing to support and protect the workers?

In practice in the labor market and especially in the private sector, there have been a number of violations especially in the area of payment of the minimum living wage and release of the workers, and the vulnerable categories of workers.

Local NGO Glasen Tekstilec together with Helsinki committee for human rights is working directly on the field to protect the garment workers by providing advisory support on what the worker should do if they face job losses, violence on their labour rights. They are using intensive media campaigns through social media channels to address the support for the workers in daily shows, contact programs etc. Glasen tekstilec is publicly exposing the names of the garment factories which dismissed workers and submits legal charges against employers to the Labour inspectorate. “Glasen Testilec” was quite active in reaching out to workers in textile and garment factories. Various reasons were used by the employers to terminate contracts, such as cases where employees on a part-time contract were terminated prematurely, ie before the expiration of the fixed-term employment contract.

Project “Responding to the socio-economic effects of COVID-19 by supporting vulnerable groups of low-paid workers, workers who are part of the informal economy and temporary workers” funded by Foundation Open Society Macedonia was implemented by several grass route organizations.

The Macedonian Occupational Safety and Health Association (MOSHA) has been closely monitoring the progress of the disease, offering information and resources for dealing with COVID-19 in North Macedonia and Western Balkans, in cooperation with their partners. During the pandemic, MOSHA has prepared and distributed guidelines and recommendations on infection control and prevention to more than 7000 health workers, together with the Trade Union of Health Workers from Centre Clinic in Skopje and the Institute of Public Health. MOSHA also provided assistance to construction and factory workers for compliance with the Coronavirus Prevention Guide. The Construction, Industry and Engineering Union has 3,800 members who comply with these Guidelines in their day to day activities.

Macedonian Occupational Health and Safety organization (MOSHA) is actively working on raising awareness on extended measures for workers safety. Many of the activities include translating fighting COVID-19 guidance, or how to act in the situation of contracting COVID-19 and have COVID – 19 manifestation. MOSHA has issued guidance’s for production facilities on how to adhere to the recommendations for workers protection. In cooperation with the MOT National Office, made the translation and technical editing of the publication “Faced with a pandemic: Care for occupational safety and health. Within CIVICA Mobilitas programme, MOSHA received an emergency ad-hoc grant to work on the protection of workers at risk from the crisis and will educate service sector workers about their rights and opportunities in this situation.

Macedonian Occupational Safety and Health Association (MOSHA) and PHI Institute of Public Health (IPH) of the Republic of Northern Macedonia established the Knowledge Center “EPI KOVID-19 Center for Occupational Safety and Health”.

What have been the responses and requests of business associations to support the industry?

Employers’ organizations and Chambers of Commerce have been active in coming up with concrete appeals to the Government for supportive measures to the local economy, such as various forms of support to companies to maintain their operations, for those that are forced to stop or drastically decrease their production/services. Employers association has addressed the risk of insecure market demand and issued instruction for the production facilities and workers how to implement the preventive measures against Covid 19 (Preparing your workplace- Macedonia).
North Macedonia’s Chamber of Commerce also seeks state aid to rescue domestic companies suffering damages due to the restrictive measures for the prevention of Covid-19. Private Sector Information – Covid-19 Deals and Government Private Sector Package Information has been issued to support the private sector to deal with the crises.
Dutch chamber of commerce in the country is supporting its members over their struggle in losing the market by addressing issues directly to the buyers and Dutch partners
Business confederation of Macedonia created several tools to support the local economy: (1) Business continuity plan; (2) An Employer Handbook for Working from home in response to the COVID-19 Pandemic; (3) Manual for business enterprises for returning to work during and after COVID–19; (4) Guide for employers to manage the workplace during COVID-19; (5) Manual for action of companies due to pandemic COVID-19.

What are international brands doing to support suppliers and protect workers?

No information available on any activities

Relevant links for more information

Ministry of Health
Coronavirus in MK
Ministry of Labour
Macedonian chamber of doctors
Macedonian occupational safety and health association
Glasen tekstilec
Adopted economic measures for support of the business sector
Institute of public health
Employers Association from North Macedonia
Federation of Trade Union SSM
Straightening Social dialogue- EU funded project