Skopje, September 27, 2016 – Growth in FYR Macedonia is expected to slow to 2 percent in 2016, affected by a decline in investment, but recover gradually to 3.3 in 2017 and 3.7 in 2018, backed by consumption and infrastructure investment. This are the provisions from the latest South East Europe Regular Economic Report, launched today in Brussels. Political uncertainties affected investments leading to a sharp decline in growth, contrary to the regional trend.
Consumption remained the main driver of growth on supported by stable employment and higher public wages and transfers.
Fiscal deficit widened from the previously budgeted 3.2 percent of GDP to 4.1 percent due to higher spending on wages, pension and social transfers than initially budgeted, as well as to accommodate the flood response spending.
Overall, the latest SEE RER notes that economic growth increased in Southeast Europe in the past year, and has begun to reduce high unemployment rates.
Economic growth forecasted in Albania, Bosnia and Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, Montenegro, and Serbia is expected to reach 2.7 percent in the region in 2016, up from 2.2 percent in 2015. Moderate acceleration of growth is projected to continue through 2017 and 2018.
“Underpinning the acceleration in growth was Serbia, the region’s largest economy,” says Barbara Cunha, World Bank’s Senior Economist and lead author of the report. “Serbia moved from 0.7 percent growth last year in the aftermath of the 2014 floods to an expected 2.5 percent this year.”
2015 |
2016f |
2017f |
2018f |
|
Real GDP growth (percent) |
||||
Albania |
2.8 |
3.2 |
3.5 |
3.5 |
Bosnia and Herzegovina |
3.0 |
2.8 |
3.2 |
3.7 |
Kosovo |
3.9 |
3.6 |
3.9 |
3.7 |
Macedonia, FYR |
3.7 |
2.0 |
3.3 |
3.7 |
Montenegro |
3.2 |
3.2 |
3.6 |
3.0 |
Serbia |
0.7 |
2.5 |
2.8 |
3.5 |
SEE6 |
2.2 |
2.7 |
3.2 |
3.6 |
Other economies in the region are expected to maintain growth of between 2.8 and 3.6 percent in 2016, with the exception of a slowdown in FYR Macedonia. In many countries, growth is translating into jobs. Employment rose by 4.7 percent in Serbia and 6.7 percent in Albania in the first half of 2016.
“Stronger growth is starting to have a positive impact on poverty and unemployment in the region,” notes Ellen Goldstein, World Bank Regional Director for Southeast Europe. “While the unemployment rate remains high, at around 25 percent on average, rates declined in five of the six countries of Southeast Europe this year.”
Global economic circumstances do not favor expansion, but for small economies like those in Southeast Europe, internal reforms can stimulate stronger outward-oriented growth even in a global slowdown.
“Countries with strong reform programs have seen a rise in investment which became a solid driver of growth in the first half of 2016,” says Katia Vostroknutova, World Bank’s Lead Economist and one of the authors of the report. “Private investment contributed strongly to growth in Serbia and Albania, and fiscal deficits and public debt declined in response to reforms in these countries.”
The average fiscal deficit in the region declined from 3.6 percent in 2015 to 3.3 percent in 2016. This average masks considerable variation among countries, with public debt rising in those countries where fiscal accounts have been overstretched by lax public spending.
The report concludes that the region has continued growing in the face of a difficult European and global environment. To sustain growth, further reforms are advised to maintain macroeconomic stability, stimulate private sector activity, enhance the effectiveness of the public sector, and build resilience to external shocks.
Contacts:
In Brussels: Anna Kowalczyk +1(202) 290 9281 akowalcyzk@worldbank.org
In Washington: Elena Karaban (+1-202) 473-9277 ekaraban@worldbank.org
In Sarajevo: Jasmina Hadžić, (+387-33) 251-502, jhadzic@worldbank.org
In Belgrade: Vesna Kostic, (+381-11) 302-3723, vkostic@worldbank.org
In Tirana: Ana Gjokutaj, (+355-4) 80-655, agjokutaj@worldbank.org
In Pristina: Lundrim Aliu, (+381-38) 224-454 #107, laliu1@worldbank.org
In Podgorica: Jasmina Hadžić, (+387-33) 251-502, jhadzic@worldbank.org
In Skopje: Anita Bozinovska, (+389-2) 3117-159, abozinovska@worldbank.org
