PODGORICA, April 27, 2021 – Growth in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia – the six countries of the Western Balkans – is expected to return in 2021, in the wake of the region’s worst economic downturn on record during 2020. Following the economic devastation brought on by the COVID-19 pandemic that resulted in an estimated contraction of growth in the region of 3.4 percent last year, the Western Balkans region is expected to grow by 4.4 percent in 2021. Going forward, growth is expected to moderate to 3.7 in 2022 and 2023, with lingering damage from the pandemic continuing to depress investments and employment in the region, according to the latest Western Balkans Regular Economic Report.
In Montenegro, the loss of the 2020 tourism season led to a more than 15 percent decline in GDP and the country saw one of the deepest recessions in Europe. Growth is expected to rebound to 7.1 percent in 2021, subject to recovery in tourism to 55 percent of its 2019 level. The report calls on Montenegro to maintain macroeconomic stability, boost human capital, reduce barriers to private sector productivity, ensure inclusive and efficient provision of public services, and carefully manage its natural resources, in order to accelerate recovery and sustain growth and poverty reduction in the country.
“The economic crisis brought on by the COVID-19 pandemic remains a source of uncertainty, but also presents an opportunity for Montenegro to build a stronger and more resilient economy,” says Emanuel Salinas, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. “Over the medium- and long terms, the focus must be on improving economic resilience by addressing internal and external imbalances and by boosting productivity growth. While we expect growth to rebound in 2021, the timing and pace of recovery is uncertain.”
The report notes that Montenegro should focus efforts on implementing reforms that can help ensure macroeconomic stability, create economic opportunities, and spur strong private-sector led growth that would benefit all Montenegrins.
“We are certainly seeing some positive trends around the region, boosted by swift action taken by many countries to contain the worst impacts of the pandemic, but the health and economic devastation of the pandemic will continue to have an impact, ” says Linda Van Gelder, World Bank Regional Director for the Western Balkans. “The introduction of vaccines, coupled with improvements in confidence, consumption, and trade, will also help keep this momentum going, but countries must remain vigilant in their efforts to introduce and reinforce policies that can lead to growth, protect health outcomes, and boost human capital.”
The pandemic halted a decade of progress in boosting incomes and reducing poverty in the countries of the region and labor markets in the Western Balkans have recovered just half of their pandemic losses – leaving large numbers of people unemployed and forcing many others to drop out of the labor market all together. Although the unemployment rate declined - from 13.5 percent in 2019 to 12.6 percent in 2020 - this was primarily the result of increased inactivity, with overall job losses around the Western Balkans reaching nearly 70,000 by the end of 2020. Furthermore, these losses disproportionately impacted the more vulnerable populations in the region, including, women and youth - with the youth unemployment rate rising to 33.6 percent in 2020, disrupting a five-year trend of decline.
According to the report, policy efforts in the region need to stay tightly focused on fighting the pandemic, limiting social damage, and nurturing recovery. All countries should ensure that their health care systems are adequately resourced for vaccine purchase and distribution, testing, therapies, personal protective equipment, and upgrading and maintain health care facilities. Investments in education, digitalization and other infrastructure projects, and green initiatives should also be prioritized, as they can accelerate the necessary transition to lower carbon dependence as countries emerge from the pandemic.
