After historic recession, gradual recovery expected in Kosovo and Western Balkans, new World Bank report says
PRISTINA, 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 resume in 2021, following the worst economic downturn on record in the region in 2020. Economic devastation brought on by the COVID-19 pandemic which led to an estimated contraction in growth in the region of 3.4% last year, the Western Balkans region is expected to grow by 4.4% in 2021. At l In the future, growth is expected to moderate to 3.7 in 2022 and 2023, as the lingering damage of the pandemic continues to depress investment and jobs in the region.
“We are certainly seeing positive trends in the region, spurred by swift action by many countries to contain the worst effects 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 maintain this momentum, but countries must remain vigilant in their efforts to introduce and strengthen policies that can lead to growth. , protect health outcomes and stimulate human capital. ”
Kosovo’s economy registered its first contraction in 2020, driven by a significant drop in exports of travel services and diaspora-related investments. The contraction was mitigated by government support measures, coupled with an increase in remittances and merchandise exports. The budget deficit more than doubled in 2020, reaching 7.6% of GDP in 2020, from 2.9% in 2019, due to falling incomes and measures to support the recovery. Kosovo’s financial sector has weathered the pandemic well. At the end of 2020, capital adequacy exceeded regulatory requirements and the NPL rate had increased slightly from a year earlier.
Economic recovery in Kosovo will also be gradual: in line with the global trend, real activity will not reach pre-pandemic levels until 2022. The recovery will be driven by increased exports and consumption. Economic growth is expected to remain above 4% in the medium term. The projected outlook is based on the assumptions of relaxed mobility between Europe and Kosovo, the absence of new strict local containment measures, a resumption of growth in the euro area and an increase in the prices of base metals and minerals. .
“Economic activity is expected to pick up in 2021, but global and national risks are significant, including delays in the purchase and distribution of vaccines, international travel restrictions and the reinstatement of strict containment measures,” said Massimiliano Paolucci, World Bank Director for Kosovo and North Macedonia. “Addressing long-standing structural barriers to growth and investing in human capital are essential to foster resilient recovery and sustainable growth,” he added.
The pandemic has ended a decade of progress in raising incomes and reducing poverty in countries in the region and the labor markets of the Western Balkans have only recovered half of their losses due to the pandemic. – leaving a large number of people unemployed and forcing many others to leave the country. labor market all together. Although the unemployment rate fell – from 13.5% in 2019 to 12.6% in 2020 – this was mainly due to increased inactivity, with overall job losses in the Western Balkans reaching nearly 70,000 at the end of 2020. In addition, these losses have had a disproportionate impact on the region’s most vulnerable populations, including women and youth – with the youth unemployment rate reaching 33.6% in 2020, disrupting a trend down over five years.
According to the report, political efforts in the region must remain closely focused on combating the pandemic, limiting social damage and recovery. All countries should ensure that their health care systems have sufficient resources for the purchase and distribution of vaccines, testing, therapy, personal protective equipment, and the modernization and maintenance of health facilities. health. Investments in education, digitization and other infrastructure projects, as well as green initiatives, should also be prioritized, as they can accelerate the necessary transition to less carbon dependency as countries move out of the economy. pandemic.
Full report: https://www.worldbank.org/eca/wbrer