Job creation slows in Western Balkans

Job creation slows in Western Balkans
Structure of the working-age population (15-64 years) from 2Q17 to 2Q18, change in percentage, in Western Balkans and EU peer countries.
By Denitsa Koseva in Sofia March 19, 2019

Although labour markets continued to improve in the Western Balkans, this trend slowed its pace in 2018, according to a report released by the World Bank and the Vienna Institute for International Economic Studies (wiiw) on March 19.

The region generated around 68,000 new jobs between the second quarter of 2017 and the second quarter of 2018, compared to 231,000 a year earlier. In contrast, GDP growth in accelerated to 3.9% in 2018 from 2.5% in 2017.

“Improvements in labour market performance are encouraging, but the decelerating trend raises some concerns,” Linda Van Gelder, World Bank director for the Western Balkans, was quoted as saying in a press release announcing the report.

“We still need a stronger private sector that generates adequate jobs and public policies that improve employability of the workforce to sustain labour market performance in the future,” she added. 

Albania and Montenegro posted the strongest employment growth in 2018 (3.3% each), followed by North Macedonia (2.1%).

“On average, regional labour markets recorded improvements in activity rates (up 0.5 percentage points to 62.8 percent) and employment rates (up 1 percentage point to 52.9 percent), but they remained far below European standards,” the report noted. Most new jobs were created in industry and services.

At the same time, unemployment reached a historically low level in most of the countries, reaching average 15.3%. The lowest level of around 12% was registered in Serbia and Albania, while the highest was in Kosovo (around 29%).

Long-term unemployment has also decreased, from a peak of 1.5mn people in 2011 to 776,000 people in the second quarter of 2018.

“Still, unemployment remained a significant challenge in the Western Balkans, where levels were two to three times higher than in EU peer countries,” the report noted.

It points out that while wages and labour costs are significantly lower in the Western Balkans than in the EU — with no clear convergence in recent years — “When compared to productivity, the apparent labour cost advantage of the Western Balkan countries disappears and the two most direct EU competitors, Bulgaria and Romania, with similar or even lower labour costs than some Western Balkan countries, seem significantly more competitive.”

At the same time, informal employment remained one of the main challenges in the Western Balkans, posting growth in Albania and North Macedonia, while falling in Serbia. Most informal jobs were held by young men, elderly women and low-educated workers.

Youth unemployment fell in 2018 by 3pp to 34.6%. However, most young people were long-term unemployed, ranging from almost 70% in Bosnia & Herzegovina to 43% in Montenegro. Of the employed young people around 50% worked on temporary contracts with the highest share of 80% registered in Kosovo and Montenegro.