世界发展银行-Western-Balkans-Regular-Economic-Report,-No.-19,-Spring-2021---Subdued-Recovery_96页_1mb

Western Balkans Regular Economic Report No.19: Subdued Recovery

Core Content Summary

This report provides an overview of the economic situation in the Western Balkans during the Spring of 2021, highlighting the region's subdued recovery from the severe economic downturn caused by the COVID-19 pandemic in 2020.

Main Views and Key Information

1. Overview of the Economic Situation

• Severe Recession: The Western Balkans experienced a deep recession in 2020, with economic activity contracting by an estimated 3.4 percent, the worst downturn on record.
• Causes of the Recession: The contraction was driven by a drop in both domestic and foreign demand, supply chain disruptions, and strict lockdown measures.
• Recovery Momentum: The recovery began in Q3 2020 with the easing of lockdowns and the revival of global demand. However, a resurgence of infections in late 2020 led to renewed restrictions, dampening the recovery.
• Expected Recovery: The report forecasts a 4.4 percent growth in 2021, though it will still be 6 percent below pre-pandemic trends. Growth is expected to moderate to 3.7 percent in 2022 and 2023.
• Key Risks: The recovery is vulnerable to further pandemic outbreaks, delays in vaccine rollouts, and premature withdrawal of policy support.

2. Severe Recession in the Western Balkans

• Impact of the Pandemic: The pandemic caused a significant economic contraction across the region, with the most severe effects in countries reliant on tourism, such as Montenegro.
• Montenegro's Performance: Montenegro was the hardest-hit WB6 country, with a 90 percent collapse in tourism and an estimated 15.2 percent contraction in GDP for 2020.
• Serbia and Albania: These countries outperformed earlier growth expectations due to stimulus packages and post-earthquake reconstruction.
• Kosovo's Recovery: Kosovo's economy contracted by 6.9 percent, but substantial public support helped avoid a deeper recession.
• Economic Components: The contraction affected all components of aggregate demand, including private consumption and investment, with a major drop in private consumption and public investment in some countries.

3. Labor Market Rebound

• Employment Decline: Employment rates fell sharply in 2020, reaching a 43.2 percent rate by end-2020, down from 44.6 percent in December 2019.
• Sector Impact: Tourism, construction, manufacturing, transport, and trade were the most affected sectors, with job losses remaining significant in many.
• Recovery Trends: Employment rebounded slowly, with some sectors, like construction, showing signs of recovery, while others, such as tourism in Montenegro, remained weak.
• Unemployment Trends: Unemployment rates declined across the region, except in Albania and Montenegro. Youth unemployment, however, rose to 33.6 percent, disrupting a 5-year declining trend.
• Informal Sector Vulnerability: The informal sector, particularly in countries like Albania and Montenegro, was disproportionately affected, with many workers losing income and jobs.

4. Government Responses

• Fiscal Support: Governments introduced significant fiscal support measures, including wage subsidies, tax relief, and social assistance, to cushion the pandemic's impact.
• Poverty Impact: These measures helped limit the labor market fallout and prevented steeper spikes in poverty, though between 165,000 and 336,000 people were pushed into poverty.
• Public Spending: High public spending on crisis-related measures drove deficits, which reached 6 to 8 percent of GDP for most countries and 11 percent for Montenegro.
• Debt Levels: Public and publicly guaranteed debt increased, reaching 64.7 percent in North Macedonia, 77.3 percent in Albania, and 93.8 percent in Montenegro.

5. Inflation Trends

• Subdued Inflation: Inflation remained low for most Western Balkan countries, with underlying trends suggesting weak domestic demand pressures.
• Monetary Policy: Central banks eased monetary policy to support demand, but the impact of this was limited as most currencies did not depreciate significantly against the euro.

6. Financial Sector Resilience

• NPLs: Non-performing loans (NPLs) showed a slight downward trend, supported by borrower relief and regulatory measures.
• Banking System: Banks entered the pandemic with strong capital buffers, but the financial sector may face stress if fiscal and monetary support is reduced.

7. External Imbalances

• Current Account Deficits: Except for Serbia, current account deficits worsened in 2020, driven by weak services and investment income.
• Net Exports: Net exports declined, particularly in Montenegro, where the collapse in foreign tourism significantly impacted the service trade balance.

8. Economic Recovery Prospects

• Vaccine Rollout: The pace of vaccine rollout is expected to be a key factor in the recovery, as it could trigger a surge in consumer confidence and pent-up demand.
• EU Recovery: A speedy recovery in the EU could also help boost confidence and exports in the Western Balkans.

9. Spotlight: Informality

• Informality in the Region: Informality is a major issue in the Western Balkans, with high tax and fiscal informality.
• Impact of Informality: Informality constrained firms and exacerbated the effects of the pandemic, particularly on the informal sector.
• Digitalization: Digitalization could help reduce informality and improve economic resilience.

Conclusion and Policy Recommendations

• Policy Focus: Policymakers need to focus on containing the pandemic, limiting social damage, and nurturing recovery.
• Healthcare Infrastructure: Ensuring adequate healthcare resources, including vaccine procurement and distribution, is critical.
• Targeted Support: Targeted support measures should continue to cushion household income and support firms affected by restrictions.
• Fiscal Sustainability: Rebuilding fiscal sustainability will be a priority as the economy recovers.
• Long-term Objectives: Investment in education, digitalization, and green initiatives is essential for resilient and equitable growth.

Key Economic Indicators

• GDP Forecast: Expected to grow by 4.4 percent in 2021, still below pre-pandemic trends.
• Employment Rate: Declined to 43.2 percent by end-2020.
• Unemployment Rates: Declined overall but rose significantly among youth.
• Fiscal Deficits: Reached 6 to 8 percent of GDP for most countries, with Montenegro at 11 percent.
• Public Debt: Increased to 64.7 percent in North Macedonia, 77.3 percent in Albania, and 93.8 percent in Montenegro.

Summary of Country Notes and Data

• Country Notes: Each country's performance varied significantly, with some outperforming expectations and others struggling.
• Data Sources: National statistical offices and World Bank staff estimates are used for all data.
• Uncertainty: The region continues to face high uncertainty due to the ongoing pandemic and limited vaccine rollout.

This report underscores the importance of continued policy support, effective containment strategies, and long-term investments to ensure a resilient and equitable recovery in the Western Balkans.