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Macedonia's Report Card - 10 Things that Could Go Wrong Business Articles | January 15 Wholesale NFL Jerseys , 2008
Like Blanche Dubois in "Streetcar Named Desire", Macedonians now prefer fantasy over harsh reality. They lash?out at?anyone who wishes to offset their euphoria with a long, hard look at hazards, real ...


Like Blanche Dubois in "Streetcar Named Desire", Macedonians now prefer fantasy over harsh reality. They lash?out at?anyone who wishes to offset their euphoria with a long, hard look at hazards Wholesale Jerseys Free Shipping , real achievements, and true future prospects.


Under the tutelage of the Gruevski government, Macedonia made great strides in a surprisingly short period of time. The government should be lauded and complimented for its energy and initiative and its inordinate ability to transform Macedonia into a modern participant in globalization. The pace and extent of its accomplishments is incredible.


Yet, Macedonia faces 10 risks and the government is doing precious little to confront them:


1. Asset Bubbles


At a multiple of 37, the Macedonian Stock Exchange is a bubble, by any definition of the word.


The Macedonian Stock Exchange Wholesale Jerseys China , as measured by its MBI-10 index, rose to a record high of close to 10,500 in mid-2007. It has since shed 30% of its gains. This correction, or, rather, rout has its roots is a series of converging factors.


Macedonia benefited from globalization. As its informal economy emerged from the shadows Wholesale Jerseys , capital controls were lifted, capital mobility increased, and foreign firms and investors entered the scene. The more the business climate improved, the better Macedonia's prospects appeared, the higher Macedonian stocks were valued by an euphoric public. Macedonia's professionals did nothing to restrain the hysteria or to ameliorate the casino mentality that pervaded the entire system. They benefited personally from the bubble.


The newfound optimism of Macedonia led to a repricing of risk and to heightened expectations of corporate profits, boosted by a more lenient tax regime and by decreasing interest rates. Equity risk premium plummeted until it vanished altogether and even became negative. The PE multiple reached a stratospheric 50 before the recent correction. It is still pegged at an unsustainable 37.


Throughout this Bacchanalia Cheap NFL Jerseys Online , foreigners flocked into the Macedonian Stock Exchange, constituting 30-40% of the buy side. But they have begun to withdraw owing to big privatizations back home, troubles in their domestic financial systems, a more restrictive monetary policy in some countries, and the changing fortunes of the Macedonian marketplace.


The down trend in the Macedonian Stock Exchange is not a mere correction. It is a repricing of assets. It still has a long way to go. Even at 4300 - the next massive technical support - Macedonian shares are inanely overvalued.


Similarly, real estate prices are stratospheric Cheap NFL Jerseys Wholesale , but this can be justified by the lack of reliable, scandal-free supply and the underdeveloped market for mortgages and real estate leasing.


Should one or both bubble burst, the adverse effects on consumption are likely to be noticeable.


2. Credit Bubble


In December 2007, holiday spending in Macedonia surged 100 million euros to 350 million euros. Most of the increase was financed with credits, as were the purchases of shares on the stock exchange, cars Cheap NFL Jerseys Free Shipping , and housing. High interest rates virtually guarantee that many of these loans will go bad. When they do, the government will be called upon to bail out the banking system. In all probability, it will.


3. Trade Deficit


Macedonia's trade deficit now equals 20% of its formal GDP (excluding the informal economy). It is unsustainable. Yet, the more vigorous the economy, the more the country's consumers and businessmen are likely to import. The culprits in engendering this imbalance are an overvalued currency, a hyper-liberalized trade regime Cheap NFL Jerseys From China , an antiquated and badly-managed industrial sector, and the profligacy of the population.


As long as unilateral transfers (such as remittances) cover the yawning gap in the current account deficit, Macedonia can survive with such irresponsible conduct. But, if the global economy turns sour, Macedonian Gastarbeiter will be forced to return home. This will likely precipitate a currency crisis.


4. Living Standards and Inflation


Inflation in Macedonia is severely under-reported by the government's Bureau of Statistics. Even so, living standards have dived with the rise in energy and food prices. The government doles out wage and pension increases but cannot compete with the global surge in the prices of commodities. Coupled with the aforementioned credit bubble Cheap NFL Jerseys China , this is an ominous sign. Macedonia could end up having its own mini-version of the crisis in the USA: bankruptcies, credit crunch, and recession.


5. Foreign Direct Investment (FDI)


While Macedonia's image and perception as a business destination and the business climate have improved considerably under Gruevski's government, in reality, not much else has changed.


Consider the following numbers, pertaining to Macedonia:


Control of Corruption Indicator Cheap NFL Jerseys , published by the World Bank: 113 (2006) vs. 111 (2007)


Country Credit Rating, published by Institutional investor: 85 (2006) vs. 84 (2007)


Index of Economic Freedom, published by The Heritage Foundation and the Wall Street Journal: 75 (2006) vs. 71 (2007)


Quality of National Business Environment Ranking, issued by the World Economic Forum in its Global Competitiveness Report: 87 out of 121 countries.


Only the World Bank's Doing Business Ranking jumped from 96 (2006) to 75 (2007). Yet, even this indicator hides some unpalatable truths: Macedonia has deteriorat

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