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World Bank: Balkan Growth Declines Despite Jobs Boost

April 11, 201813:26
Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia added 190,000 jobs last year but economic growth declined, says the World Bank’s latest report on the Western Balkans.
Presentation of the World Bank report in Sarajevo. Photo: Anadolu

Average GDP growth in Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia declined from 3.1 per cent in 2016 to an estimated 2.4 per cent in 2017 due to lower investments and a harsh winter, according to the World Bank’s latest economic report on the Western Balkans, published on Wednesday.

Bosnia and Herzegovina however became the leading country in the region when it came to lowering the unemployment rate.

“From the perceptive of the region, this is a very positive step for Bosnia and things are not that bad, but the country must continue with its reform agenda and the biggest change at the moment is the upcoming elections,” Sandra Hlivnjak, an economist for World Bank in Bosnia told Anadolu on Wednesday in Sarajevo during the presentation of the report.

GDP expansion of between 3 per cent and 4.4 per cent in Albania, Bosnia, Kosovo and Montenegro was tempered by no growth in Macedonia and an increase of just 1.9 per cent in Serbia, the World Bank said.

But the overall outlook is positive, as growth in Serbia and Macedonia is recovering, while Bosnia and Kosovo are seeing an increase in investments.

Meanwhile growth in Albania and Montenegro has moderated as large investment projects wind down, and much-needed fiscal consolidation is continuing in Montenegro. 

Employment is on the rise in the region, with all six countries adding jobs in 2017, particularly in the wholesale and retail trade.

The average employment rate for the Western Balkans has been steadily rising, reaching 42.6 per cent in September 2017, while youth unemployment fell from 37.5 per cent in 2016 to 31.5 per cent in 2017.

However, according to the report, the pace of job creation is slowing, with the annual rate of employment growth falling from 4.5 per cent in 2016 to 3.2 per cent in September last year.

The World Bank’s findings, country by country:

Albania: Economic growth is estimated to have reached 3.8 per cent in 2017, supporting job creation and helping to reduce poverty.

Growth is expected to moderate to 3.6 per cent in 2018 as two large foreign direct investment energy projects wind down.

Although public debt declined in 2017, the pace of fiscal consolidation slowed.

Continued efforts to consolidate public finances, improve the efficiency of spending, reduce debt and contingent liabilities, and introduce structural reforms in the energy, financial, and judiciary sectors are critical to foster confidence and drive sustainable growth.

Bosnia and Herzegovina: With economic growth estimated at 3 per cent in 2017, Bosnia has kept growth stable for the last three years.

The trend is expected to continue in 2018 and pick up in the medium term as structural reforms take effect and there is increased investment in infrastructure.

Although the economy has been expanding steadily, unemployment remains high, particularly among youth. As a result of the planned push in public investments.

As general elections approach, reforms may slow, clouding the outlook.

Kosovo: The economy grew by an estimated 4.4 per cent in 2017, up from 4.1 per cent in 2016, driven mainly by investment and exports.

In 2017, the fiscal deficit was low at 1.4 percent of GDP due to good revenue performance and under-execution of the capital budget.

Strong growth supported job creation in 2017; the labour market participation rate went up by 3.3 per cent and employment by 1.3 per cent.

Major risks lie in Kosovo’s political dynamics and the incomplete execution of the investment program.

Macedonia: Stagnant economic growth in 2017 reflects the lasting effect of a prolonged political crisis. Growth is projected to rebound to 2.3 percent in 2018, driven by consumption and recovering investment.

Labour market performance improved as unemployment fell to a historic minimum of 22.4 percent.

Although higher than in most Western Balkan countries, employment and labour force participation rates are low by EU standards. 

Montenegro: Economic growth accelerated to 4.3 per cent in 2017, led by investment in highway construction and a record-setting tourism season.

Growth is projected to moderate to 2.8 per cent in 2018 as the needed fiscal consolidation advances.

Administrative unemployment remained high because of considerable informality and high labour imports. Labour market participation did increase slightly, particularly among men.

Tax increases led the fiscal consolidation process, but the deficit and public debt remain high. 

Serbia: Economic growth slowed to an estimated 1.9 per cent in 2017, mainly because of bad weather. However, employment increased by about 3 per cent in 2017, driven by more formal employment in services and manufacturing.

Continuing fiscal consolidation and lower than planned public investment led to a budget surplus of 1.2 percent of GDP that reduced public debt.

This year, growth is expected to reach 3 per cent as domestic demand picks up.

The main concerns now are the sustainability of fiscal consolidation, the recent expansion of the external deficit, and the implications for external debt.

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