BACKGROUND: North Macedonia is a top global tobacco producer, with subsidies supporting 28,000 households. However, declining production trends and insufficient incomes challenge subsidy sustainability. As an EU candidate, the country must align with the Common Agricultural Policy (CAP), requiring diversification away from tobacco. This study examines the economic implications of tobacco subsidies and the crowding-out effect on other crops..
METHODS: A mixed-methods approach was used, analyzing data from the Ministry of Agriculture, national statistics, and a survey of 2,205 tobacco farmers. Trends in tobacco production, subsidy allocation, and trade balances were assessed, alongside modeling for potential crop diversification to peppers, fruit trees, and aromatic plants.
RESULTS: Tobacco subsidies, accounting for 25% of agricultural support, incentivize overproduction, creating market distortions and price declines. Cultivated land and buyer contracts have decreased since 2013. Tobacco farmers earn below the national average, with household incomes falling short of minimum living standards. Approximately 30% of surveyed farmers are ready to diversify, while trade deficits persist, driven by rising food imports that overshadow tobacco export inflows.
CONCLUSIONS: Current subsidy policies are unsustainable and hinder long-term development. Transitioning from tobacco farming to food crops and value-added agricultural activities can improve trade balances and align with CAP requirements. Targeted subsidies for high-value crops, infrastructure investment, and farmer education are needed to enable diversification. These measures will strengthen the agricultural sector and address economic and social disparities.