The economy of North Macedonia has become more liberalized, with an improved business environment,[5] since its independence from Yugoslavia in 1991, which deprived the country of its key protected markets and the large transfer payments from Belgrade.

The economy can meet its basic food, coal and hydroelectric power needs but depends on outside sources for all of its petroleum and natural gas and most of its modern machinery and parts.

Inflation jumped to 11% in 2000 largely due to higher oil prices,[citation needed] but the currency has calmed since the exchange rate was normalised when the EU Stabilisation and Association Agreement entered into force in 2004.

North Macedonia's economy has almost always been completely agricultural in nature from the beginning of the Ottoman Empire when it was part of the Sanjak of Üsküp and Salonica vilayet.

[citation needed] When World War II ended, the local economy began to experience revitalization by way of subsidies from Federal Belgrade.

North Macedonia today maintains a low debt-to-GDP ratio and is experiencing a revitalized investment interest by companies from Turkey, Algeria, Albania, and others.

At independence in September 1991, North 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 the Socialist Federal Republic of Yugoslavia ended transfer payments from the central government and eliminated advantages from inclusion in a de facto free trade area.

[citation needed] Since then, North Macedonia has maintained macroeconomic stability with low inflation, but it has so far lagged the region in attracting foreign investment and creating jobs, despite making extensive fiscal and business sector reforms.

In the wake of the global economic downturn, North Macedonia has experienced decreased foreign direct investment, lowered credit availability, and a large trade deficit.

However, as a result of conservative fiscal policies and a sound financial system, in 2010 the country credit rating improved slightly to BB+ and was kept at that level in 2011.

North Macedonia also has concluded an "Agreement for Promotion and Protection of Foreign Direct Investments" with Albania, Austria, Bosnia and Herzegovina, Bulgaria, Belarus, Belgium, Luxembourg, Germany, Egypt, Iran, Italy, India, Spain, Serbia, Montenegro, People's Republic of China, South Korea, Malaysia, Poland, Romania, Russia, Slovenia, Turkey, Ukraine, Hungary, Finland, France, the Netherlands, Croatia, Czech Republic, Switzerland, and Sweden.

Low public and external debt and a comfortable level of foreign exchange reserves allowed for further relaxation of monetary policy, with the reference interest rate of the Central Bank decreasing to 4%.

Due to rising prices for energy, fuel, and food on international markets, inflation increased in the first half of 2011, but later decreased to an annualized rate of 3.4% at the end of September.

This was due primarily to a 4.4% higher inflow of current transfers, mostly during the summer, and came despite a poor level of foreign direct investment (FDI) of only $237.2 million by end-July 2011.

Foreign currency reserves remained at about $2.6 billion, a level that comfortably covers 4 months of imports and about 110% of the country's short-term debt.

In October 2010, the World Bank Board of Directors approved a new Country Partnership Strategy (CPS) with North Macedonia for the period 2011–2014.

This CPS will provide the country assistance of about $100 million in funding for the first 2 years to improve competitiveness, strengthen employability and social protection, and increase the use of sustainable energy.

This assistance also includes a commitment of $30 million in direct budget support in the form of a policy-based guarantee by the World Bank to the government to facilitate its access to financing from international capital markets, a process that had been started as of November 2011.