This year, Macedonia has embarked on comprehensive pension reform aimed at adapting to demographic shifts, ensuring financial sustainability, and improving fairness for retirees.
This year, Macedonia has embarked on comprehensive pension reform aimed at adapting to demographic shifts, ensuring financial sustainability, and improving fairness for retirees. Here are the key changes:
Shift in Pension Indexation Method
The government introduced a price-wage indexation formula, often referred to as the “Swiss model,” for adjusting pensions. This new method replaces the previous CPI-only indexation. The change was introduced in 2023 but is under review in 2025. This reform affects the public sector, pension funds, and financial services. The pros of this change include higher pension increases during periods of wage growth and maintaining pensioners’ purchasing power. However, it also increases fiscal pressure on the pension system, and the IMF and World Bank recommend reverting to CPI-only indexation to ensure sustainability.
Proposed Return to Rule-Based Indexation (CPI-only)
The IMF recommends reverting to inflation-only indexation by 2026 to control pension spending and ensure fiscal sustainability. Although no formal legislation has been passed yet, this proposal is expected to affect government budget planning and pensioners and retirees. The pros of this change include helping to reduce the pension deficit and supporting long-term fiscal consolidation. However, it may reduce real income growth for pensioners during times of wage inflation.
Expansionary Pension Spending in 2024–2025
The new government, elected in June 2024, increased pension payments and social transfers as part of its expansionary fiscal policy. This change took effect from mid to late 2024 and continues into 2025. It impacts public finance and social protection sectors. The pros of this policy include providing short-term relief and boosting domestic demand, making it politically popular among retirees. However, it adds to the fiscal deficit and pension fund liabilities and may delay structural reforms.
To understand these pension reforms further and how they impact your business, speak to our expert in Macedonia:
Zoran Georgiev
General Manager
GrECo North Macedonia
T +38977889088
