World Bank reports faster growth in Western Balkans bringing more jobs

World Bank reports faster growth in Western Balkans bringing more jobs
By Valentina Dimitrievska in Skopje April 6, 2017

Countries in the Western Balkans are growing at a faster pace now than in 2015, with regional economic growth projected at 2.8% in 2016 and 3.2% in 2017, which will bring more new jobs to the region, according to the latest World Bank Western Balkans Regular Economic Report.

Despite this progress, the World Bank said that the labour market remains challenging in the Western Balkans, with the unemployment rate hovering around 22% in 2016. 

While only two countries registered a higher growth in 2016, it was enough for the overall growth in the Western Balkans to increase by 0.6 percentage points (pp).

"Accelerating growth in Albania and Serbia compensated for weaker expansion in Montenegro and Macedonia, while growth in Kosovo slowed in 2016, but it remained the fastest growing economy," the World Bank said in its latest report.

Albania’s and Serbia’s GDP has increased to 3.2% and 2.8% respectively. The economy slowed down to 2.4% in Macedonia and 2.1% in Montenegro. Kosovo posted the strongest growth of 3.6% in 2016, even though it slowed from 4.1% growth a year earlier. Bosnia's growth was also lower at 2.8%.

In 2016, more jobs and low prices helped to reduce poverty in the Western Balkans region, with average poverty rates dropping by nearly two percentage points (pp) in Albania, Macedonia and Montenegro, complementing other gains which have helped lift approximately 240,000 people out of poverty over the last three years, the publication said.

"Growth and employment increased especially in countries that have made significant progress in cutting fiscal deficits, tackling the legacy of a large and ineffective state and improving the environment for domestic and foreign investments,” World Bank country director for the Western Balkans, Ellen Goldstein, said in a statement.

According to the report, reform efforts have been effective in attracting private investment, stabilising public debt, and increasing household incomes.

“Growth, as well as external and fiscal balances of countries that sustained reform efforts also improved, strengthening their resilience to potential economic shocks,” the report noted.

The World Bank also praised the six countries for improvements in their fiscal balances.

According to the report, sustaining growth in the Western Balkans and tackling the ongoing challenges of unemployment will require countries to stay on the course of reform.

"In particular, further fiscal consolidation and structural reforms are necessary for all six countries to improve the efficiency of their public sectors and enhance the competitiveness of their economies in order to promote private sector development," the report said.

It also stressed that reforms should focus in the areas of labour markets, business climate public sector efficiency and global integration, while ensuring sustainable use of energy and natural resources. 

Referring specifically to Macedonia, the World Bank said economic growth slow due to lower investments affected by the political crisis, while the main driver of its economy was final consumption helped by improvements in the labour market and higher wages. The Macedonian economy is expected to grow by 2.8% in 2017.

A Positive Growth Outlook
(Real GDP growth, percent)

 

2015

2016e

2017f

2018f

Albania

2.6

3.2

3.5

3.5

Bosnia and Herzegovina

3.0

2.8

3.2

3.7

Kosovo

4.1

3.6

3.9

4.2

FYR Macedonia

3.8

2.4

2.8

3.3

Montenegro

3.4

2.1

3.3

3.0

Serbia

0.8

2.8

3.0

3.5

Western Balkans

2.2

2.8

3.2

3.6

Data

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