Poor infrastructure holds back economic growth in Western Balkans

Poor infrastructure holds back economic growth in Western Balkans
Europe's Infrastructure Gap.
By bne IntelliNews February 8, 2018

The six Western Balkan countries have underdeveloped public infrastructure, which is an obstacle for their economic growth, according to a report from the International Monetary Fund released on February 8.

The report focuses on analysts of the current situation and on the possible benefits for the Western Balkan countries if they find a way to develop the transport, power, and telecoms networks.

“The IMF has identified the region’s missing core public infrastructure as a significant obstacle for higher economic growth. Better transportation, energy, and telecommunications networks would help Western Balkan countries raise productivity, integrate deeper into the bloodstream of global trade, and improve the region’s attractiveness for foreign investment,” the IMF said.

According to the report, a regionally coordinated public infrastructure push, coupled with better management of actual projects, could significantly increase per capita income.

“The long-term gain of real GDP per person could be as high as three to four percentage points,” the IMF noted.

However, to improve the level of their public infrastructure, the six countries need to find fresh funding and at the same time not to threaten their public finances as most of the countries already have high levels of public debt and high budget deficits.

The six countries should also improve regional cooperation as many infrastructure networks stretch over borders.

“Countries should consider saving on their recurring expenses to find resources for costly projects. Governments could create further room for maneuver by broadening their tax base (by eliminating exemptions and tax incentives) and strengthening tax compliance, both of which result in more revenues collected,” the IMF noted.

It added that external financing should play a significant role in public infrastructure development in the Western Balkans, leaving domestic financial resources to serve the needs of the private sector.