EIU sees growth of Balkan economies averaging 1-2% in 2013

By bne IntelliNews October 18, 2013

Growth of the Balkan economies will average 1-2% in 2013, according to the Economist Intelligence Unit (EIU), senior analyst Joan Hoey said on Oct 17 at the EU-Balkan Summit in Sofia, organised by The Economist. The EIU expects growth to accelerate in 2014.

The EIU forecast Bulgaria's GDP to expand by  0.6% in 2013. Hoey did not provide more country-specific details besides saying that this year Croatia will be the only country from the region with negative growth.

Hoey underscored that in 2009 the Balkan region was hit badly by the global financial crisis, making the region the worst performer amongst emerging market areas. She emphasised that Bulgaria and Romania were hit particularly hard by the crisis as in 2009 Bulgaria's economy contracted by a real 5.5% and that of Romania - by 6.8%. In the period from 2010 to 2012, growth stagnated at about 1% per year in both countries.

According to the EIU, the ongoing recession in the Eurozone is acting as a brake on economic activity in the Balkan region through weaker trade, investment and financing. Exports and industrial output have weakened and business and consumer sentiments are fragile. In addition to faltering external demand, domestic demand has remained anaemic.

External bank loans and FDI, both of which helped drive growth in the pre-crisis period are now likely to remain subdued. Furthermore, exposure to the Eurozone crisis is magnified by the fact that the Balkan economies have extensive links with crisis-hit Greece, Hoey said.

As far as stability is concerned, the EIU rates as high the risk of social unrest in many of the counties in the region because of high unemployment, poverty and ethnic tensions.

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