Regional Economic Environment: Insights from North Macedonia’s Agricultural Sector

Abstract The role of agriculture in the broader development process is extensively explored, but with no particular focus on the direct and indirect linkages among factors considering the influence of the business environment on the regional economy. This study explores the managerial perception of agricultural companies in North Macedonia regarding the status, prospects, and challenges for agriculture within the regional economy when having cooperation with Albania, Serbia, and Montenegro. A comprehensive five-stage methodology was applied to assess the factors of influence underlying the pros and cons of agricultural development. These stages encompassed a literature review, the construction of a theoretical model, data collection, principal component analysis, and the application of structural equation modeling. Three direct and two indirect linkages are hypothesized for constructing a model that quantifies the impacts of the business environment essential for the regional economy. The highest significant threshold is found for the direct path of COVID-19, followed by a strong negative direct connection to the Russia-Ukraine crisis, and a medium direct effect of governmental support. The latter indicated the Russia-Ukraine crisis and COVID-19 as having extremely strong indirect connections to the regional economy. So, supporting measures and activities of government is identified as the key issue for further growth and development of the agricultural sector in North Macedonia. The proposed model can be easily adopted and applied to other countries to screen and evaluate agricultural development. The study informs main policymakers on how to approach the challenges of the regional economy and to improve the country’s agricultural outlook.