Unemployment Drops While Growth Slows in Western Balkans

Economic activity is slowing in the Western Balkans, as investments and exports continue to fade in the six countries around the region. Growth is estimated at 3.2% in 2019, down from 3.9% in 2018, according to the latest Western Balkans Regular Economic Report, Rising Uncertainties. While growth in North Macedonia has continued to pick up following a major slowdown in 2019, and is expected to remain strong in Kosovo at 4.0 percent, most economies in the region are seeing slower growth compared to one year ago. While the regional economy is forecast  to grow in 2020 and 2021, it will remain slightly below the ten year high of 2018.

“Continuing growth in the region is helping to create jobs for people, bringing more women into the workforce and helping to curb emigration,” says Linda Van Gelder, World Bank Director for the Western Balkans.

“However, the gathering economic clouds on the horizon point to a need for policymakers to boost competitiveness, increase the efficiency and efficacy of public spending, and address rising fiscal imbalances in order to build on these successes and nurture sustainable growth.”

Despite this economic slowdown, unemployment continued to decline in the region – falling to historic levels. By June of this year, 150,000 more jobs had been created in the region, compared to one year earlier. This trend also included 43,000 jobs for young people, with Albania accounting for nearly half of these jobs. Even with these positive economic developments, just 44% of working-age people in the Western Balkans has a job, labor market inactivity continues to hoover at 48% and widening intraregional disparities in labor market outcomes are of concern. In both Kosovo and Bosnia and Herzegovina, inactivity increased in 2019, suggesting that more people left the job market than found a job.

Facing rising uncertainties in the region, the report calls for a rapid improvement in public spending and competitiveness. Tighter controls on wage bills, reductions in tax expenditures, and better targeting of social benefits can lead to more public investment, improve equity, and create fiscal buffers to mitigate rising risks in the region.