Despite bumps on NGEU road, investments that mostly rely on EU funds seen as key growth driver*

Designed as a temporary funding instrument of the European Union that can mobilise up to 723 billion euro (at 2022 prices) in grants and loans, the NGEU was established to encourage the completion of investments and structural reform measures. The ECB staff estimate that, the NGEU may increase the level of real GDP in the euro area by up to 1.5% by 2026 if fully implemented (The economic impact of Next Generation EU: a euro area perspective (europa.eu)). This makes quite a difference as it will lift growth prospects further.

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Fostering Economic Growth and Sustainability: how to unlock EU Funds potential in CEE

The NGEU is a temporary funding instrument of the European Union designed to mobilise up to 723 billion euro in grants and loans to encourage investments and structural reform measures. If fully implemented, the NGEU could increase the real GDP in the euro area by up to 1.5 percentage points by 2026, significantly lifting growth prospects. As of now, two and a half years into the program, the Recovery and Resilience Facility (RRF) disbursements have reached 107 billion euro, which is more than 30% of the total expected to be requested by EU countries in the period 2021-2026.

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Going local will be the name of the game

The war in Ukraine was the trigger for many negative developments in the world economy, which is going through a very unstable period. Prices are rising rapidly, interest rates are being increased to slow down the inflation, energy prices and supply issues are only the tip of the iceberg of problems in the world economy. The EU is under even greater pressure, having in mind its dependence on Russian gas and oil and the need to switch to other sources. The economy is showing the first signs of a recession which could hit us more strongly than anyone expects. And the crisis is not only economic. The healthcare crisis with Covid is still underway, and on top of all that the war in Ukraine is fully changing the geopolitical situation in Europe and all over the world. Add to this the recent US – China tensions around Taiwan. These economic and geopolitical issues are hitting the business and we expect that many companies will struggle to keep their positive results and liquidity in the forthcoming period. Higher interest rates will lead to less investments and development project and will force managers to reduce costs of operations.

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One Crisis on Top of Another – the case of North Macedonia

As everywhere in the world, it all started to deteriorate with the COVID-19 pandemic. Pre-pandemic real GDP growth of 3.9 percent in 2019 turned into negative real GDP growth of 6.1 percent in 2020. Economic recovery started in 2021 but it did not offset fully the decline from the previous year as the real GDP growth in 2021 equaled 4 percent. In 2022, economic growth amounted to 2.4 percent and 2.8 percent in the first and second quarter, respectively. Given the fact that the impact from the energy prices spike started to materialize in the real sector operations, it is not very likely at this moment that the real GDP growth of 3.2 percent, as projected by the finance ministry, will be achieved in 2022.