North Macedonia cuts fuel VAT and excise; experts call for targeted measures

Aneta Dodevska*, North Macedonia

 

As a country 100% dependent on imports of petroleum products, the first hit to North Macedonia’s economy came in this sector. Just one day after Iran was attacked by the US and Israel, fuel prices increased significantly—gasoline by €0.08 per liter and diesel by €0.23 per liter. This marked the beginning of an upward price spiral, and within a short one-month period, not only did fuel prices rise, but prices of some basic food products also increased. This trend was confirmed by the State Statistical Office.

In March this year, compared to the same month last year, total inflation in the Republic of North Macedonia reached 4.9%, with the largest annual increase in the cost of living recorded in ‘food and non-alcoholic beverages’ at as much as 7.5%, and in ‘alcoholic beverages, tobacco and narcotics’ at 8.8%.

If we look more closely at the price structure of food products, double-digit increases in costs are seen in fruit, meat, sugar, and coffee.

March 2026 / March 2025

Coffee:                                 +25.89%

Meat, live animals:              +12.76%

Fruit:                                    +12.75%

Non-alcoholic beverages:    +14.64%

Sugar, sweets, desserts: +10.22%

Since the beginning of 2026, the highest annual inflation rate in the Republic of North Macedonia was recorded in March; in January it was 3.1%, while in February it was 2.9%.

The new crisis has not only direct price impacts but also indirect effects across several segments of the private sector. Some companies in the textile industry faced reduced orders for the European market, especially from Germany, which is the most important trading partner, accounting for 40% to 50% of total exports of North Macedonia. Risks related to the crisis are also being closely monitored by the Council of Foreign Investors. According to current analyses, there are no disruptions in the import of raw materials or export of finished products.

“There is still no drastic decline because there is uncertainty and everyone is waiting to see what will happen. The situation is fluid, but I cannot say directly whether and to what extent there will be an impact on our clients,” the Council of Foreign Investors stated.

 

Reduced VAT to 10% for fuels and lower excise duties — are the measures enough to protect citizens?

The new wave of price increases triggered numerous reactions in society—whether the Government should take measures and what those should be. Three weeks after the official start of military actions in the Middle East, on March 22, the Government made its first decision for state intervention in fuel prices. Specifically, VAT was reduced from 18% to 10%, and a state of energy crisis was declared to create a legal possibility to release fuel oil from state reserves.

On April 5, 2026, the Government made a second decision—the VAT reduction remains in force until the end of the crisis, and additionally, excise duties were reduced: diesel by €0.06 and gasoline by €0.03 per liter. According to Prime Minister Hristijan Mickoski, North Macedonia remains the country with the lowest fuel prices in the region.

“Fuel supply is stable, there is no need for restrictions, despite increased consumption reaching up to 2 million liters daily, partly because citizens from neighboring countries are refueling at the northern, southern, and western borders,” said the Prime Minister.

The Government also stated that some airports in the region are supplied with kerosene from North Macedonia, including the airport in Pristina, which is fully supplied from the country. With the latest price intervention, gasoline is sold between €1.32 and €1.37 per liter, while diesel costs €1.50 per liter.

Were the Government’s actions sufficient to protect citizens’ living standards? A public debate has opened at political, academic, and business levels. The opposition parties SDSM and DUI assessed that the measures are not only insufficient but merely cosmetic, with negligible effect in cushioning the overall price shock.

“Mickoski’s measures are late, insufficient, and will have absolutely no effect because the price increase spiral has already begun. When we warned that measures should be introduced on time, as many countries in the region did, the Government did not listen,” said Venko Filipche, leader of SDSM.

Apart from reducing VAT and excise duties, the Government is currently refraining from additional steps. An inter-ministerial working group has been formed to monitor price movements, and more frequent inspections in retail are announced to track prices in supermarkets.

According to economists, state intervention in fuel prices was necessary but not sufficient. Professor Vancho Uzunov from the Faculty of Economics at Ss. Cyril and Methodius University says that the Government boasting about low fuel prices and foreign buyers signals liquidity problems in the budget.

“This is not something to boast about—it signals a budget problem. On one hand, taxes are reduced; on the other, the state finds a new revenue source through increased fuel sales. These measures are just ‘tactical moves.’ Urgent targeted measures are needed to protect the poorest citizens, and such measures are missing. The issue is not only fuel prices but also basic food prices,” says Uzunov.

This year, state budget expenditures are projected at €6.78 billion, while revenues are €6.087 billion. The budget deficit is projected at 3.5%. However, former Finance Minister Xhevdet Hajredini believes these projections will not withstand the pressure of the crisis.

“The current budget is not designed for such a major crisis; a rebalancing will be necessary. We are facing a dramatically difficult crisis. Additional budget measures will be needed. It is crucial that public money is spent transparently. Some officials were under the illusion that the war would end in one or two weeks. The crisis continues, and the consequences for economies will be significant. North Macedonia, along with Kosovo and Albania, is among the poorest countries in Europe, and governments must pay special attention to protecting citizens’ living standards,” Hajredini explained.

In the past decade, the highest annual inflation rate—between 14% and 15%—was recorded in 2022 during the COVID health crisis.

 

*Aneta Dodevska is a journalist and an editor in TV 24 News in North Macedonia

This article was specifically written for Monitor magazine. This section is supported by the GIZ Regional Program #SustainMedia, funded by the European Union (EU) and the German Government (BMZ). The views expressed in this section are those of the authors and do not necessarily reflect the views of the EU or BMZ.