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North Macedonia adopts 2020 budget, targets lower deficit

SKOPJE (Reuters) – North Macedonia’s parliament adopted a draft 2020 budget on Sunday which forecasts economic growth of 3.8% and targets a deficit of 2.3% of national output compared with 2.5% this year.

Revenues are seen at 3.6 billion euros ($3.97 billion) and spending at 3.9 billion euros, with the latter including increased funding for the defense ministry which will lead the necessary reforms as the country prepares to join NATO.

Even though the Balkan country has revived efforts to open accession talks with the European Union, the bloc in October failed to approve the start of talks with North Macedonia and Albania.

The leaders of North Macedonia, which expects to become a fully-fledged member of NATO early next year, have said they remain committed to pursuing efforts to join the wealthy 28-member EU.

The budget includes the effect of already increased salaries for public sector employees, as well as a wage rise in the health sector scheduled to take effect in January and pension increases from February.

On the revenue side, the introduction of a progressive personal income tax will be put on hold for 36 months, during which a flat rate of 10% will be applied.

The budget envisages a rise in the pension contribution rate to 18.8% from 18.4% this year aimed at lowering the pension deficit, and a rise in the health contribution rate to 7.5% from 7.4% in 2019.

The budget gap is projected at 282 million euros or 2.3% of forecast GDP, with the primary deficit at 1.2% of GDP.

Additional financing needs for debt repayment of 703 million euros will be met by borrowing on domestic and international capital markets and project financing by international financial institutions.

Average annual inflation is seen at 1.7%, compared with 1.0% in 2019.

(Reporting by Kole Casule and Daria Sito-Sucic; Editing by Kirsten Donovan)

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