After joining Nato and launching official negotiations for EU membership, foreign direct investment (FDI) into North Macedonia jumped between 2020 and 2021, with renewable energy and information communication technology (ICT) projects contributing the most.

Invest North Macedonia, the country’s investment promotion agency, tells fDi that the country’s political stability is a key factor in the process of attracting new foreign investments.


However, there are still hurdles for the country's economy and FDI growth. The key downside risks are linked to the war in Ukraine, according to Fitch Ratings. 

Fluctuating FDI

North Macedonia’s FDI inflows show fluctuations over the past five years. In 2017, the country hit record low FDI inflows with $89.2m, then reached $850m in 2018, according to data from foreign investment monitor fDi Markets. After a landmark decision to change its name from the Republic of Macedonia to North Macedonia and leave behind a long-standing dispute with Greece in 2018, FDI inflows into the country dropped to $207.6m with 10 projects in 2019. The pandemic made the situation worse as its FDI inflow plummeted by 67% from 2019 to 2020, worth $136m.   

In 2021, North Macedonia experienced its highest level of foreign investment inflow in the recent five years, a total of $992m. 

Relative to the size of its gross domestic product (GDP), the country’s FDI performance in 2021 fared better than any other country in the world except for Costa Rica and the UAE, according to fDi’s latest greenfield foreign investment index, published in August.

In 2021, North Macedonia also saw its economy recover. The country's GDP fell by $500m from $12.61bn in 2019 to $12.12bn in 2020. The next year, GDP recovered, standing at $13.88bn, according to World Bank data.


According to fDi Markets, two solar and one wind renewable energy investments were the three largest projects in North Macedonia last year, followed by three investment projects in the software and IT sectors.

Reducing geopolitical risk

The country’s investment promotion agency believes that reducing geopolitical risks has bolstered its growth. “North Macedonia being part of Nato is indeed one of the reasons for the big jump in FDI inflow,” Invest North Macedonia adds. 

North Macedonia became a member of Nato in March 2020, and its priority is now to wrap up the EU accession talks. The official negotiations started in July – it took the country 18 years to enter official talks since it first submitted its application to join the EU in 2004.

“The EU accession process helps to anchor policy and support exports and FDI inflows [into North Macedonia],” Erich Arispe, senior director at Fitch Ratings, tells fDi. 

Bulgarian ICT outsourcing company Scalefocus, which opened a new office in North Macedonia in 2021, tells fDi that the company certainly took into consideration “the stability of the political and economic systems of the country”.

Mr Arispe notes that assessment of geopolitical risks will “play a more important role” in the decisions of foreign investors going forward due to the uncertainty regarding the evolution of the war in Ukraine, as well as the “prolonged tensions between the West and Russia”. 

According to the North Macedonia economic outlook published by Fitch in July, closer ties with the EU will improve the investment outlook as it “strengthens the investor confidence”. However, the rating company still expects that the war in Ukraine will hamper investment due to energy supply disruptions from Russia, which the country relies on for imported gas, and the impact of the war on North Macedonia's largest export market, Germany.

The credit rating agency also said the country has continued problems in global manufacturing supply chains. 


According to fDi Markets figures, renewable energy projects contributed most to FDI in North Macedonia between January 2017 and July 2022, totalling $739m, followed by the real estate sector ($409m) and software and IT ($381m). 

French Ostro Solar and UK-based infrastructure investor Energy Financing Team (EFT) Group announced plans to develop new solar power plants in North Macedonia last year, worth around $302.8m and $217m, fDi Markets data shows. 

The Ostro Solar plant will have a total installed capacity of between 350 and 400 megawatts (MW).

EFT Group tells fDi that North Macedonia brought forward a clear strategy toward the development of renewables, which was the main reason for the investment decision. The company says it plans to build three more solar plants of 80-100MW, and it is waiting to see if the first one will start construction before it applies for more licences to expand the business. 

North Macedonia aims to increase the share of renewable energy sources in electricity to reach 46% by 2025, according to the Economic Reform Program (ERP) 2022-2024, submitted to the European Commission (EC) in January. 

An analysis of North Macedonia Energy published in 2021 by Heinrich Boll Stiftung, a think tank for a green policy and reform, describes North Macedonia's energy market as “one of the most attractive among the countries of south-east Europe with its policy change”. Policy brief reports that North Macedonia has great potential for renewable energy, in particular solar and wind power.  

The new legislation on energy law, adopted in 2018, brought the system in line with the EU Energy Community’s Third Energy Package, which is a legislative package for an internal electricity market in the European Union.


However, the country’s young energy sector also faces challenges. 

Andreas Chollet, country manager at WPD, a German renewable energy company, tells fDi that one of the headwinds for the company is a “monopolised utility system by state-owned electricity producers, Elektrani na Severna Makedonija (ESM), and lack of experience in how to handle large investments by independent operators in their energy sector”.

The company announced plans to build a 415MW wind farm in North Macedonia, worth around $217m. It is expected to be fully operational around 2030.

ESM owns and operates North Macedonia’s only wind farm. 

The investment promotion agency argues that, with the new energy law, the country is “strongly committed to energy market developments, including continued liberalisation of the electricity market”. 

The software and IT sector, which saw the most FDI projects between 2017 and July 2022, is also facing a major hurdle, namely the labour shortage. A spokesperson at IT company Scalefocus, says: “North Macedonia offers a more limited market capacity due to the smaller size of the country, in a context of an existing shortage in the IT labour market.”

However, the North Macedonian investment promotion agency says that the country has access to 680 million consumers through three multilateral free trade agreements - Stabilisation and Association Agreement, European Free Trade Association, and Central European Free Trade Agreement - and two bilateral trade agreements with Turkey and Ukraine.

“We are also a member of the Open Balkan [initiative], an economic and political zone of three member states in the Balkans, those being Albania and Serbia.” The investment promotion agency believes this Balkan economic zone will become more active with the exchange of information about business opportunities, with the possibility of accessing bigger markets.

“If we join forces, this could be a success story,” adds the promotion agency.

This article first appeared in the October/November 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.