World Bank sees Western Balkan economy grow 3.4% in 22, 2.8% in 23
SARAJEVO (Reuters) – The World Bank on Monday raised its 2022 economic growth forecast for six Western Balkan countries to 3.4% from 3.1% previously, but warned it was still affected by the war in Ukraine and the resulting inflation and slowing global growth.
Economic growth driven by private consumption and investment proved robust in the first half of 2022, while employment reached historic highs and now averages 46%, an increase of 3 percentage points compared to mid-2021, with services contributing to labor market recovery, the bank said in a regional report.
“While growth in the first half of 2022 proved to be relatively robust, it is clear that the region is now heading for another storm,” said World Bank senior economist Sanja Madzarevic-Sujster.
The bank cut its 2023 growth estimate for Albania, Bosnia, Kosovo, Montenegro, North Macedonia and Serbia by 0.3 percentage points to 2.8%, citing prospects of a continued high inflation, declining consumer and investor confidence, tighter financing conditions and strains on global supply chains.
Rising energy and food prices have pushed inflation to levels not seen in many years, eroding purchasing power and business confidence. Food inflation has reached up to 25% in Bosnia, Montenegro and North Macedonia, according to the report.
The bank expects inflation, which it forecasts at 10.9% in 2022, to remain in double digits in all Western Balkan countries except Albania, and to decline to 6, 4% in 2023.
In addition, the labor market is starting to cool, with employment slowing amid high inflation and heightened uncertainty.
The bank warned that a number of the region’s poor could rise by 13% due to rising food and energy prices unless governments act to cushion the crisis. severity of price shocks.
Policymakers should promote reforms that would boost medium-term growth at limited fiscal costs, including measures to increase the level of market competition, remove barriers to business entry, and increase retention. and reinvestment by foreign investors, according to the report.
(Reporting by Daria Sito-Sucic; Editing by Diane Craft)
Copyright 2022 Thomson Reuters.