FINANCING SUSTAINBLE GROWTH

North Macedonia is relying on Market Failure theory for the role of Government in the economy. The Government should take a back seat and simply create condition for private sector to invest and generate growth. Thus, public expenditures are kept at 1/3 of GDP for many years. Private sector investments in fix assets are anchored on average in last two decades at 22.4 percent of GDP. Result has been a moderate growth, that is not sufficient in foreseeable future to close the gap in living standard between the North Macedonia and EU. Innovative ecosystem and de-risking private sector investments is perceived more adequate model for achieving smart, sustainable and green growth. Such policies must put innovation at heart of growth policies. The Government should have a mission to fund innovations, direct economy to green and smart. This will require public expenditures steadily to reach threshold of 40 percent of GDP. Higher private investments: domestic and foreign, should be attracted by de-risking private sector and by strong private public partnership. This should accelerate growth to 5 percent on long-run, make it more inclusive and secure swift living standard convergence towards EU.