Publication: Western Balkans Regular Economic Report No. 15, Spring 2019: Reform Momentum Needed
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2019-04
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2019-04-08
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The Western Balkans economies are projected to continue to expand in 2019–20, but this stable outlook is vulnerable to risks. 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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“World Bank Group. 2019. Western Balkans Regular Economic Report No. 15, Spring 2019: Reform Momentum Needed. © World Bank. http://hdl.handle.net/10986/31506 License: CC BY 3.0 IGO.”
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In November 2012, the European Investment Bank, the European Bank for Reconstruction and Development, and the World Bank announced 30 billion in financing for Central and South East European countries over the next two years. In SEE6 countries, this timely initiative would likely be delivered via the Western Balkans Investment Framework (WBIF) and other IFI resources. Investment Promotion Agency (IPA) resources will also be important, especially in supporting institutional reform and rural development. By focusing on major infrastructure of regional significance (rail, highways, energy, and gas) and on jobs and small and medium enterprises, the efficiency of investments, growth, and employment could be substantially heightened. However, additional financing for growth and jobs could prove effective only if accompanied by intensified fiscal and structural reforms, especially in the areas of investment climate, labor markets, and governance.Publication Western Balkans Regular Economic Report, No. 19, Spring 2021(World Bank, Washington, DC, 2021-04-27)In 2020 COVID-19 (coronavirus) plunged the Western Balkan countries, like the rest of the world, into deep recession. Economic activity contracted by an estimated 3.4 percent - the worst downturn on record. The primary causes were the drop in both domestic and foreign demand and disruptions in supply chains, especially early in the year when activity in a number of sectors simply shut down. Countries like Montenegro that have a services or tourism-oriented economy, and those where more stringent containment measures and lockdowns were imposed fared the worst. The economy began to reactivate in Q3 2020, supported by a partial easing of stringent lockdowns and the revival of global demand as vaccine development advanced. However, in late 2020 restrictions were renewed in response to a resurgence of infections across most of the region; they have kept the recovery subdued. The crisis has led to significant job losses and interruptions in welfare improvements, but the labor market is rebounding from the troughs of the recession. As noted in the Fall 2020 Regular Economic Report (RER), the pandemic halted a decade of progress in boosting incomes and reducing poverty: Since its start 139,000 jobs have been lost and between 165,000 and 336,000 people in theregion were pushed into poverty. However, job support schemes and other government measures limited the labor market fallout and helped to prevent steeper spikes in poverty. By yearend, the labor market had recovered half its pandemic losses, but large numbers of people are still unemployed, and many dropped out of the labor force discouraged by the poor economic prospects. Moreover, workers with less education, women, youth, those in contact-intensive sectors, and those informally employed have suffered disproportionate livelihood and income losses.
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