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News 19 Dec 12

Balkans Face Sluggish Growth in 2013, Bank Says

World Bank report predicts feeble return to growth next year, urging Southeastern European countries to reduce their debt levels and advance reforms leading to greater productivity and competitiveness.

Besar Likmeta
BIRN
Tirana

The World Bank South East Europe Regular Economic Report, SEE RER, published on Monday, said the combined economies of the six countries in the region will shrink by 0.6 per cent in 2012, and grow sluggishly by 1.6 per cent in 2013.  

“In this fragile environment, Western Balkan governments need to pursue reforms that make a difference for long-term growth and jobs,” Zeljko Bogetic, a leading economist for the World Bank in the region, said.

 “What is needed... is more intensive policy reform to reduce public debt and accelerate structural reforms, especially in public sector governance, the investment climate, and labour markets,” he added.

In 2012, deteriorating external conditions, the impact of the severe winter on economic activity and increased unemployment took their combined toll on consumption, investments, and exports, the report says.

It notes that credit recovery and fiscal consolidation are under threat, while non-performing loans are again on the rise. As a result, both within and outside the region the environment has become more difficult to navigate, and the policy trade-offs necessary to stabilize economies and reignite growth are tougher.

According to the report, growth in the region in 2013 will depend on the pace of recovery in the euro-zone and high commodity price, which could also worsen poverty levels and put pressure on the middle class. 

The bank warns that Serbia, Albania, and Montenegro are particular vulnerable and will need to reduce fiscal deficits and bring down public debt, while continuing to improve the investment climate and reform labour markets and the public sector.

“Although these countries saw limited growth after 2008, they have never fully recovered from the crisis,” Bogetic noted.

“There remains a problem with mismatched skills in the region – a large part of the labour force is trained for the public sector while demand for labour in the private sector remains un-met and sluggish,” he added. 

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