development model

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Figure 4 – Sectoral breakdown of value-added

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Figure 5 – Sectoral breakdown of employment

1990 1995 2000 2005 2010 2015 2020

Services Industry Agriculture

Source: WDI, World Bank 1991 1996 2001 2006 2011 2016

Services Industry Agriculture

Source: WDI, World Bank

These changes have been accompanied by different productivity trends in the different sectors, as measured by the value-added per worker. With the share of agricultural employment falling faster than the sector’s share in GDP, labor productivity in the agricultural sector has thus increased by around a third (+33.7 percent) - though it should be noted that this increase primarily took place during the first sub-period (2001-2008), during which productivity increased by 90 percent. Productivity in the industrial sector has increased by almost 58 percent over the past twenty years, due to the sector’s growing share in GDP combined with its falling share in employment. Again, this increase was much more marked in the first sub-period (+31.3 percent), with a decline in productivity seen over the most recent sub-period (-9.4 percent between 2014 and 2019). Finally, as the share of services in GDP has stagnated while the sector’s share in employment has rapidly grown, labor productivity in this sector has declined by nearly 15 percent in twenty years. Overall, the most notable productivity gains were achieved in the 2001-2008 sub-period (+25.1 percent), with labor productivity tending to stagnate in the sub-periods that followed. 1.2 – The challenge of identifying a development model

North Macedonia’s economic growth, therefore, remains slow, and its medium- to long-term outlook appears relatively uncertain. Since 2014, private consumption and investment have driven growth, with the former boosting wholesale and retail trade, transport, and tourism, and the latter stimulating the construction sector, in infrastructure and private housing, and the manufacturing sector. Despite this, growth remains relatively sluggish, and the manufacturing sector is not producing the anticipated spillover effects.

At present, none of the potential alternative scenarios to this growth model appear to be sufficiently advanced, concrete, or feasible. North Macedonia became a candidate for EU membership in 2005, and at present there is no end in sight to this seventeen-year-old process, the outcome of which remains uncertain even beyond the fact that talks are currently being blocked by Bulgaria. Yet the North Macedonian government still sees accession to the EU, in terms of both the journey and the final goal, as the country’s road to development. EU membership might indeed help to shift some of the current obstacles to the country’s development. Progressive convergence toward European standards, particularly normative standards, may