Western Balkans’ growth slows in 2022 and 2023 – World Bank report

Economic growth in the six Western Balkan countries slowed in 2022 and 2023, due to weakening of global demand amid shocks from Russia’s invasion of Ukraine, inflation, and worsening financial conditions, the World Bank said in its regional report on Thursday.

The lender said that growth in the region comprised of Albania, North Macedonia, Serbia, Kosovo, Bosnia and Montenegro is expected to gradually recover over the medium term.

The World Bank upgraded its 2023 growth forecast for Albania and Montenegro to 3.6% and 4.8%, respectively. It downgraded growth for Bosnia, Kosovo, North Macedonia, and Serbia to 2.2%, 3.2%, 1.8%, and 2%, respectively.

The lender saw regional economic growth at 2.5% in 2023, 0.1% down from projections this spring.

“The six Western Balkans countries are expected to witness slower growth in 2023, … owing to weaker consumption and exports, reflecting weaker European Union’s performance,” the report said.

The World Bank warned that a prolonged slowdown in the EU and “internal structural bottlenecks,” could lead to further downward revisions of growth forecasts.

“If inflation is not brought back to long-term averages as planned, this may further hurt domestic demand,” it said.

Inflation pressures in the region are easing, although price pressures persist, the report said. After peaking in October 2022 at 15%, average inflation in the six countries has been on a downward trend, reaching 8.4% in July 2023.

The lender warned that the reforms in the region are needed to consolidate the recovery toward sustainable growth, while membership negotiations with the EU hold the potential to bolster prospects in the Western Balkans.

All six countries want to join the EU but the pace of their accession to the bloc differs.

Serbia and Montenegro were first in the region to open EU membership negotiations, while Albania and North Macedonia began talks with Brussels last year. Kosovo and Bosnia are still lagging far behind.
Source: Reuters (Reporting by Aleksandar Vasovic; Editing by Diane Craft)