Background:
International recognition of Macedonia's independence from Yugoslavia in 1991 was delayed by Greece's objection to the new state's use of what it considered a Hellenic name and symbols. Greece finally lifted its trade blockade in 1995 and the two countries agreed to normalize relations, although differences over Macedonia's name remain. The undetermined status of neighboring Kosovo, implementation of the Framework Agreement - which ended the 2001 ethnic Albanian armed insurgency - and a weak economy continue to be challenges for Macedonia.

Economy - overview:
At independence in September 1991, Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of Yugoslavia ended transfer payments from the center and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on Yugoslavia, one of its largest markets, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. GDP subsequently rose each year through 2000. However, the leadership's commitment to economic reform, free trade, and regional integration was undermined by the ethnic Albanian insurgency of 2001. The economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth barely recovered in 2002 to 0.9%, then rose to 2.8% in 2003. Unemployment at one-third of the workforce remains the most critical economic problem. The gray economy is estimated at around 40% of GDP. Politically, the country is more stable than in 2002.

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