Macro Outlook on the Western Balkans Daniel Berg Director for Serbia 05/06/2018
Western Balkans countries face a large convergence gap… Average GDP per capita for the six WB countries is only ½ the average in the 11 EU member countries and just ¼ of the most advanced western European countries GDP per capita (PPP adjusted) Source: Peter Sanfey and Jakov Milatovic (2018), The Western Balkans in transition: diagnosing the constraints on the path to a sustainable market economy, EBRD 2
…potentially taking several decades to cover it Baseline scenario (average growth rates for the period of 2001-2016): 60 years Optimistic scenario (pre-crisis growth rates): just under 40 years Pessimistic scenario (post-crisis average growth rates): more than 200 years Convergence scenarios Source: IMF World Economic Outlook; Sanfey and Milatovic (2018) calculations 3
Transition gaps are largest in competitiveness and governance EBRD’s new approach to measuring transition: 6 “qualities” Competitive Well-governed Green Inclusive Resilient Integrated • Market • National-level • Mitigation of • Gender equality • Financial • Openness to structures for governance climate change • Regional stability foreign trade, competition and • Corporate-level • Adaptation to • Resilient energy investment and disparities business finance governance climate change • Opportunities sector standards • Domestic and • Other for young • Capacity to add cross-border environmental people value and infrastructure areas innovate Transition scores for six qualities of a sustainable market economy (1-10) Source: EBRD 4
The region scores poorly on cross-country measures of competitiveness Western Balkans economies lack competitiveness, largely because of difficulties in the business environment Dealing with construction permits and getting electricity are the most problematic areas o Rankings in the Doing Business 2018 Report (1-190) USA 6 MKD 11 GER 20 EU-9 32 SLO 37 KOS 40 MNE 42 SRB 43 YU-7 44 CRO 51 ALB 65 BIH 86 0 190 Source: World Bank 5
Competitiveness problems are also associated with still large state presence … as indicated by high share of state-owned enterprise assets in the majority of WB countries Assets of SOEs* (% of GDP; 2015) 120 100 80 60 40 20 0 Ukraine Montenegro Croatia Serbia Slovakia Slovenia Bosnia Latvia Macedonia Greece Poland Lithuania Kazakhstan Estonia Hungary Bulgaria Romania Kosovo Moldova Turkey * preliminary Source: EBRD calculations based on ORBIS data 6
WB economies are dominated by SMEs OECD study: SMEs make up about 99 per cent of businesses in all countries of the WB SMEs provide jobs for around ¾ of the total number of employed and add around ⅔ of the countries’ total annual value added, a proportion similar to the EU average SMEs sector employment SMEs sector value added (share of total) (share of total) Source: OECD Source: OECD 7
WB economies are rather diversified 4 sectors are particularly important: Trade, Industry, Public administration and Agriculture Trade (including Transport & Accommodation and food services) is on average the largest sector of the WB economies: ranging from 18 per cent of gross value added (GVA) in Albania and Serbia to 27 per cent in o Montenegro Accommodation and food services are particularly developed in tourism – oriented Montenegro o GDP breakdown by sectors Source: National statistical offices 8
There is significant room for increasing FDI inflows As a consequence of the global financial crisis, the FDI in the region dropped However, over the past five years, Albania, Kosovo and Serbia have all experienced annual FDI inflows at a rate above the OECD average of 4.1 per cent of GDP Still, the region lags significantly behind the EU in terms of FDI stock per capita received ( € 2,600 vs € 14,300) A more simple and reliable investment framework is needed to attract more FDI o FDI stock per capita (euros) Source: IMF World Economic Outlook. 9
WB countries lag behind EU standards in all aspects of public governance The most problematic areas are corruption, rule of law, government effectiveness and political stability Voice and accountability and regulatory quality have the highest scores, although good marks for the latter may reflect implementation of the EU acquis , rather than genuine independence and capacity of the regulators The Worldwide Governance Indicators (Scores range from -2.5 for weak governance performance to 2.5 for strong governance) Source: World Bank. 10
Pick-up in growth is expected in 2018 and 2019… Growth of the region slowed down in 2017 mostly on the back of developments in two countries – FYR Macedonia (political crisis) and Serbia (drought) Growth should pick up this year on the back of expected significant improvements in FYR Macedonia and Serbia, but also continued robust growth in the remaining countries Credit growth acceleration has been broad-based across the region, supporting domestic demand Average credit growth GDP growth and outlook (per cent, year-on-year) (share of total) 5 2016 2017 2018* 2019* 4 3 2 1 0 ALB BIH KOS MAC MNE SRB * EBRD forecast (May 2018) Source: National authorities, EBRD Source: National Central Banks, IMF 11
…helped by the EU recovery All WB countries have preferential access to EU markets for most goods through Stabilisation and Association Agreements As a result, ⅔ of the region’s exports are with the EU, with some differences among economies: the share ranges from 80 per cent in FYR Macedonia to just 23 per cent in Kosovo o on average 20 per cent of WB exports go to the neighbouring countries o In 2017, euro area recorded 2.4 per cent growth, strongest since 2007, supporting the growth of the region Exports by destination (per cent of total exports) Source: UNCTAD, Central Bank of Kosovo, Sanfey and Milatovic (2018) calculations 12
Financial sector resilience is improving as NPLs have been going down Access to finance is one of the most significant obstacles to doing business in the region The combination of excessive pre-crisis lending, lax supervisory standards and a major economic slow-down has left many banks with a high level of NPLs All countries in the region are addressing the problem with the support of the international community through the Vienna Initiative 2 Share of credit-constrained firms Non-performing loans (per cent) (per cent) Source: Source: EBRD-World Bank BEEPS V, 2013. Source: National authorities 13
Serbia: EBRD snapshot EBRD Inves estm tment ent Ac Activities ities in Serbia bia 1 Portfolio € 2,244m # of active projects 100 Serbia - Key figures Equity share 13% Operating assets € 1,529m Population (m) 7.0 2016 2 Private sector 44% Net cum. investment € 4,538m share of portfolio GDP per capita (PPP,USD) 14,493 2016 Portf tfolio olio Comp mposition sition ( € m) m) ABI and Operat ation ions Global Competitiveness Index (World Economic Forum, rank out of 78 2017-18 3,000 700 25 138) 600 20 2,500 500 15 Unemployment (%) 400 2,000 300 (Statistical Office of the Republic of 15.3% 2016 10 1,500 200 Serbia) 5 100 1,000 0 0 500 Youth unemployment (%) 0 (Statistical Office of the Republic of 34.9% 2016 2010 2011 2012 2013 2014 2015 2016 Serbia) ABI #of projects Infrastructure Industry, Commerce & Agribusiness (left axis € m) (right axis) Financial Institutions Energy Portf tfolio olio Dynam amics ics Transition sition Gaps Female Labour participation (%) 43.4% 2016 (International Labour Organization) 3,000 100% Competitive 10 2,500 80% 8 2,000 60% 6 4.94 Energy intensity (TPES/GDP) Integrated Well-governed 1,500 6.39 4 40% (toe/thousand 2010 USD. Source: 0.35 2014 1,000 4.39 2 63% 20% IEA) 500 0 0 0% 5.77 Advanced countries 5.55 (GER, SWE, USA) Resilient Green Emission intensity/GDP Serbia 5.16 1.01 2014 (kgCO2/2010 USD. Source: IEA) Portfolio (LHS € m) Private Sector Western Balkans (ALB, BIH, FYM, KOS, MNE) Operating assets (LHS € m) Inclusive 1. End-October 2017 data. Private sector share: cumulative Bank Investment 5 year rolling portfolio ratio 14
Recommend
More recommend
