The EBRD will likely revise downward its 2013 growth projection for the SEE region from its current 1.4% estimate published in May*, the bank’s lead economist Peter Sanfey said on Friday, October 18. The EBRD now expects a minimal GDP expansion in the region, Sanfey told the EU-Balkan summit conference organised by the Economist Intelligence Unit in Sofia last week.

Growth will strengthen to an average of 1.5-2.0% in 2014 but will remain well below the growth rates in other emerging markets, Sanfey said. The EBRD will publish a detailed forecast in the coming weeks.

The Bank’s growth outlook is in line with the latest projections of the IMF for a weak GDP expansion of the SEE region, Sanfey added. According to IntelliNews calculation based on the October World Economic Outlook, the region will grow an average 1.3% in 2013 and 2.1% in 2014.

Sanfey underscored the countries in the region cannot rely on monetary and fiscal policy levers any more to stimulate growth due to the high fiscal imbalances. There are severe fiscal problems in Serbia where the budget gap is estimated at some 7.5% of GDP by the IMF but also in Albania, Croatia and Montenegro, Sanfey said. On the monetary side, the small size of the Balkan economies considerably limits the effectiveness of their monetary policies.

It is therefore essential to identify bottlenecks to growth and act through structural reforms. In particular, institutional reforms in the region could bring real benefits and add up to one percentage point of growth each year, Sanfey said. The SEE average growth in the long term could thus reach 3.5-4.0%, up from 2.0-3.0% currently projected.

* includes Albania, Bosnia, Bulgaria, Kosovo, Macedonia, Montenegro, Romania, Serbia.