Slight slowdown seen this year after temporary surge in 2018
The EBRD expects continued steady economic growth in the six Western Balkan countries in 2019, despite a cooling international economic environment which may see the pace of growth slowing in some countries in the region.
Presenting its latest economic forecasts at the EBRD’s Annual Meeting in Sarajevo, the Bank reports that Montenegro and Serbia were the fastest growing economies in the region in 2018, with both countries enjoying strong investment flows.
Other countries in this region also grew robustly, with North Macedonia bouncing back after near-zero growth the previous year. The resolution of the country’s name dispute is expected to boost EU accession progress and contribute to better prospects for investment and growth.
Commenting on the regional outlook, EBRD Lead Economist Peter Tabak said further reform efforts and stronger investment activity are needed to deliver growth required for sustainable convergence with European Union income levels.
“Stronger regional integration, including through the abolition of remaining tariff and non-tariff barriers to trade would open up new growth opportunities for domestic companies and foreign investors,” he added.
Looking ahead, the outlook predicts growth in Albania of 3.9 per cent in 2019 and 2020, slightly slower than the 4.1 per cent seen in 2018. It points to continuing downside risks, linked to the economic slowdown in Albania’s main economic partner, the eurozone. Internal risks for Albania include high public debt levels as well as the continuing domestic political crisis.
In Bosnia and Herzegovina, the economy has continued to be resilient to a slow-down of reforms and continued political uncertainty. In 2018, GDP grew by 3.1 per cent. The economy is expected to continue growing at 3.0 per cent in 2019 and 2020.
However, the 2019 projection has been revised downwards by 0.5 percentage points from the previous November 2018 report, due to delays both in the formation of new governments after the October 2018 elections and a programme with the International Monetary Fund.
Relatively strong economic growth continued in Kosovo in 2018 for the fourth year in a row. After 3.7 per cent growth in 2017, GDP grew by 3.9 per cent in 2018, driven by investment and consumption. Growth in 2019 and 2020 is expected to stay at 4.0 per cent, with domestic demand continuing to be the main driver.
In Montenegro, growth surprised on the upside. In 2018, the economy expanded by close to five per cent, on the back of highway construction, real estate projects at the coast, an exceptionally strong tourism season and a further rise in private consumption.
The completion of large investment projects and continuing fiscal consolidation will lead to a significant slowdown in growth to 2.8 per cent in 2019 and 2.6 per cent in 2020.
After almost zero growth in North Macedonia in 2017, the economy expanded by 2.7 per cent in 2018 on the back of strong growth in exports and recovery of private and public consumption.. Growth is expected to pick up slightly in 2019 to 3.0 per cent on the back of an expected recovery in investment, and continue at the same pace in 2020.
Growth in Serbia quickened to 4.3 per cent in 2018 after just 2.0 per cent growth in 2017, as a result of further recovery of domestic demand and strong exports. Growth is expected to slow down to 3.5 per cent in 2019 and then inch back up to 3.8 per cent in 2020, with private consumption, investment and exports remaining the main growth drivers, with offsetting effects coming from higher imports.