As the world’s larger economies react violently to domestic political shifts, smaller emerging economies look increasingly attractive for foreign investment.
The establishment Western economies were hit hard by the Brexit referendum and Donald Trump’s unanticipated yet successful bid for the U.S. presidency. Rather than play the role of international market stabilizers, the world’s first (U.S.) and fifth (U.K.) largest economies injected shock waves of fear onto international trading floors when the unexpected prevailed. The pound hit a record low following the referendum. American markets showed steep losses and then dramatic gains as investors anticipate greater unpredictability when it comes to the policy choices of president-elect Trump’s incoming administration.
Big economies have big ripples. But select smaller markets can escape the waves of uncertainty that cripple the leading global investment hubs. During periods of economic uncertainty, look to smaller economies that offer investment opportunities insulated from outside turmoil.
Look to south eastern Europe in Macedonia, a small landlocked Balkan country strategically located where the east meets the west. The country has undergone considerable economic reform since gaining independence in 1991. Originally one of the republics of socialist Yugoslavia, Macedonia has experienced slow but steady economic growth since the mid 1990s.
It was the poorest of the republics at the time of its independence, but after foreign aid helped soften the initial market volatility, Macedonia’s GDP has seen steady growth nearly every year and now experiences one of Europe’s largest growth rates at 4 percent per year under former Prime Minister Nikola Gruevski’s government.
The country has received accolades for its economic stability: The World Bank ranked Macedonia as among the top 10 in the world for ease of doing business.
In recent years, the Macedonian government has been hyper-focused on growing foreign investments within the country, developing programs to create an incomparable environment for business growth. Macedonia boasts a flat tax of 10 percent on both profit and income, one of the lowest rates in the world, and a zero percent tax on reinvested earnings.
Macedonia also offers a strong workforce, with an abundance of skilled labor at a comparably competitive value. The educational curriculum is geared for businesses to leverage, with many of the country’s vocational high schools focusing on various trades. Educational standards at technical higher educational institutions in Macedonia resemble those of the Western countries. In addition, the government supports investors tapping the labor force by promoting vocational schools. As a result, the unemployment rate has declined, reaching a record low of 24 percent in the second quarter of 2016.
The country has received accolades for its economic stability – in October of this year, the World Bank released its annual “Doing Business” publication, ranking Macedonia as among the top 10 in the world for ease of doing business. The report considers 10 factors when making its calculation: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The World Bank’s report comes after IBM and KPMG both released similar reports commending Macedonia as ripe for investment.
Perhaps most importantly, unlike its older and larger neighbors, Macedonia remains remarkably unaffected by the issues that have rocked international markets, as proven by recent Brexit impact.
Ratings agencies are downgrading the world’s largest economies, financial analysts are predicting a hard Brexit that could have ripple effects on the global economy, and President-elect Trump’s economic policies remain uncertain. In the next year both Germany and France, the world’s fourth and sixth largest economies respectively, will hold national elections that feature anti-establishment candidates who are capable of upending established political order as witnessed in the U.S. and U.K. this year. A dramatic or unexpected change in either country will impact not just local economies, but an array of global investments.
Relying on the leading global markets for investment alone is made more risky in times of global political upheaval.
Leaning into an emerging economy such as that found in Macedonia, with its skilled workforce and business concessions, can provide alternative, stable opportunities for investment.
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