Rising risks to Western Balkans growth outlook

Rising risks to Western Balkans growth outlook
Limited private sector dynamism is reflected in slow job creation, World Bank report says.
By Denitsa Koseva in Sofia April 2, 2019

Although the economic growth of the Western Balkans is projected to remain robust at an average of 3.7% in 2019 and 2020, it is facing growing external and domestic risks, including geopolitical and trade disputes and a slower-than-expected pace of structural reforms, the World Bank said in its latest regular economic report on the region, Reform Momentum Needed, released on April 2.

"Prolonged trade disputes between the United States and China, potential trade restrictions between the United States and the EU, and uncertainty about Brexit talks between the EU and the United Kingdom are generating anxiety about protectionist policies that would ultimately hurt global, and therefore Western Balkan growth prospects," says the report, commenting on the external risks facing the region. 

According to the report, despite stronger growth in 2018, fewer new jobs were created in the region, reflecting limited dynamism in the private sector. The World Bank noted that only 96,000 jobs were created in 2018, mostly in industry and services, compared to 171,200 jobs created in 2017. At the same time, unemployment remained high, particularly for women and young people.

In March, the World Bank released another report jointly with the Vienna Institute for International Economic Studies (wiiw), which said that the job creation has significantly slowed down in the region, which is raising some concerns.

“Policymakers in the region should look to implement reforms that can help generate a sustained growth momentum that spurs job creation,“ Linda Van Gelder, World Bank director for the Western Balkans, was quoted as saying in a press release on the report’s publication.

The Western Balkan countries should advance reforms to improve productivity, stimulate growth, and create jobs, according to the report.

Real GDP growth in Western Balkans        
  2017 2018e 2019f 2020f
Albania 3.8 4.2 3.8 3.6
Bosnia & Herzegovina 3.2 3.0 3.4 3.9
Kosovo 4.2 4.2 4.4 4.5
North Macedonia 0.2 2.7 2.9 3.2
Montenegro 4.7 4.4 2.9 2.4
Serbia 2.0 4.2 3.5 4.0
Western Balkans 2.6 3.8 3.5 3.8
Source: World Bank