Publication: Western Balkans Regular Economic Report No.23, Spring 2023: Testing Resilience
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2023-06-16
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2023-06-16
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The six countries of the Western Balkans have seen their resilience tested over the last three years. Growth in the Western Balkan economies started strong in early 2022, before moderating toward year-end, but the impact of major shocks, such as electricity and heating outages, has been less severe than expected. Inflation surged to a two-decade high in 2022 in almost all economies, and price pressures remain elevated in early 2023. Higher food and energy prices have affected low-income households especially severely, resulting in a much slower pace of poverty reduction in 2022 despite universal government support. In the medium term, the Western Balkans continues to have a positive outlook, but reforms are needed to rebuild buffers, accelerate the green transition, and to address key structural challenges. The ongoing energy crisis has highlighted the need to accelerate the green transition across Europe, including in the Western Balkans. A key starting point in this regard is to accelerate the move toward carbon pricing and to increase the use of environmental fiscal measures that incentivize households and firms to shift toward lower carbon intensity with respect to economic activity.
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“World Bank. 2023. Western Balkans Regular Economic Report No.23, Spring 2023: Testing Resilience. © World Bank. http://hdl.handle.net/10986/39890 License: CC BY-NC 3.0 IGO.”
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Publication Western Balkans Regular Economic Report No. 25, Spring 2024(Washington, DC: World Bank, 2024-04-11)Economic growth in the Western Balkans slowed to 2.6 percent in 2023, from the 3.4 percent reached in 2022, reflecting the impact of a weak European economy weighed down by sequential shocks. Overall, the WB6 region has experienced a rise in total hours worked driven by employment growth and labor force expansion, especially driven by women joining the labor force. Poverty in the Western Balkans returned to its declining trend during 2023, but at a slower pace than pre-pandemic. A robust fiscal performance and solid rate of gross domestic product (GDP) growth led to a fall in debt as a share of GDP. After increasing to levels not seen in several decades, inflation rates in the WB6 fell significantly during 2023. Growth projections for the medium term have increased slightly, reflecting cautious optimism that, having weathered a flurry of shocks over recent years, the Western Balkans is beginning to see a return to trend economic performance. However, while the WB6 region is expected to return on its pre-pandemic trend in 2024, this is insufficient to enable meaningful convergence with European Union (EU) income levels over the medium term. The spotlight in this edition of the Western Balkans Regular Economic Report focuses on the role of cities as engines of growth and leading actor in the green transition. This spotlight recommends action on three main fronts to make cities in the Western Balkans greener. First, it is crucial to reduce urban sprawl and make cities more compact. Second, cities must bring down their emissions, also because this will have immediate improvement on socio-economic and environmental outcomes. And third, cities must take actions to reduce extreme urban heat and enhance preparedness for it.Publication Western Balkans Regular Economic Report No.24, Fall 2023(Washington, DC: World Bank, 2023-10-19)In the context of weakening global demand, growth in the Western Balkans decelerated over the course of 2022 and into 2023. Against the background of the lasting effects of shocks from Russia’s invasion of Ukraine, sticky inflation, and tighter financial conditions, global demand has been weakening, and this has a divergent impact across the Western Balkans (WB6). On the one hand, the slowdown in global demand contributed to weaker-than expected performance of industrial production in the whole European Union (EU) region and in the WB6. On the other hand, global demand has proved more resilient in services and, for travel, with twice as many people traveling globally during Q1 2023 as in the same period in 2022 (UNWTO). 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In 2018 economic growth in the Western Balkans reached 3.8 percent, supported by increased public spending, and in Albania and North Macedonia also by a rise in net exports. Growth is projected to average 3.7 percent for 2019–20, faster than the EU and similar to the average for Central and Eastern Europe (CEE). Growth will differ by country, accelerating in Bosnia and Herzegovina, Kosovo, and North Macedonia while decelerating in Albania, Montenegro, and Serbia. Factors common to all countries are the recent fiscal stimuli and favorable external conditions that pushed growth in 2018, beyond its potential in some of them. The waning effects of these factors challenges the medium-term growth outlook in the region. Moreover, there is growing public discontent in several countries which could lead to higher political uncertainty and a slower pace of structural reforms. In North Macedonia, by contrast, the resolution in early 2019 of the decades-long dispute with Greece over the country’s name is an opportunity to advance reforms, accelerate EU accession, and become more integrated in global markets. Western Balkan countries are also confronted with growing external risks from slower-than projected growth in the EU, geopolitical and trade disputes, and a possible tightening of financing conditions in international capital markets. Against this backdrop, there is anopportunity to advance reforms to mitigate risks and the demands for greater economic opportunities. This report features a special focus section on human capital development. The region has achieved notable progress in expanding access to basic education and health and setting up social protection systems to protect the vulnerable. This Focus Section explores how Western Balkan societies can be better prepared to take advantage of the opportunities offered by rapid technological changes, mitigate risks, and create dynamic growing economies where young people can thrive and realize their aspirations. Unaddressed, the region’s human capital challenges will severely limit the region’s prospects for growth and poverty reduction. For instance, too little investment in early childhood development translates into poor performance in primary and secondaryeducation in some countries. In school, students in some countries do not acquire the skills they need to function effectively as labor markets become ever more competitive. Poor quality technical and university education makes the transition from school to work difficult; many graduates who suffer years of unemployment cannot build work experience. Social assistance programs also do not give vulnerable households the support they need to prepare them for the labor market. Inefficient health systems are unable to address the rise of noncommunicable diseases, and individual out-of-pocket spending on health is high. In general, countries in the region must act boldly to build human capital.
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