South East Europe Regular Economic Report, No. 3 : From Double-Dip Recession to Accelerated Reforms

After two years of fragile recovery from the global recession, as a group the six South East European countries (SEE6) Albania, Bosnia and Herzegovina (BIH), Kosovo, FYR Macedonia, Montenegro, and Serbia are experiencing a double-dip recession in 2012. Deteriorating external conditions, the impact of the severe winter on economic activity, and a continuing rise in unemployment early in the year took a toll on consumption, investments, and exports. In this fragile environment, Serbia, Albania, and Montenegro in particular will need to persevere in reducing fiscal deficits and bringing down debt, even as they must continue to improve the investment climate and reform labor markets and the public sector. In all SEE6 countries, public sector arrears pose special challenges to fiscal management and the private sector, and there are unfinished, structural reforms agendas. After two years of deep crisis, a sluggish recovery, rising unemployment and poverty, and a continuing recession even with the best efforts on fiscal consolidation and structural reforms, which must continue there is a danger that SEE6 countries are caught in a vicious circle that reinforces the cycle of long-term austerity, low if not negative growth, high debt, and even higher risks of social upheaval. To prevent this outcome, this report argues, SEE6 governments need to redouble their efforts to accelerate fiscal and structural reforms. These countries have largely exhausted their fiscal space and reduced public investment (except Kosovo, an outlier) to a fraction of what is needed to maintain public capital stock in critical infrastructure. Private investment is suppressed by the lack of productive, complementary public investments, slow credit recovery, and depressed domestic demand. External demand is minimal, and exports are not only too few, they are prevented from becoming an immediate, new engine of growth by infrastructure, finance, and other deficiencies. If such accelerated reforms materialize, external support well-coordinated and targeting the region as a whole, not just individual countries from the European Union (EU) and global international financial institutions (IFIs) could help ease the transition to a more sustained growth in medium term. In November 2012, the European Investment Bank, the European Bank for Reconstruction and Development, and the World Bank announced 30 billion in financing for Central and South East European countries over the next two years. In SEE6 countries, this timely initiative would likely be delivered via the Western Balkans Investment Framework (WBIF) and other IFI resources. Investment Promotion Agency (IPA) resources will also be important, especially in supporting institutional reform and rural development. By focusing on major infrastructure of regional significance (rail, highways, energy, and gas) and on jobs and small and medium enterprises, the efficiency of investments, growth, and employment could be substantially heightened. However, additional financing for growth and jobs could prove effective only if accompanied by intensified fiscal and structural reforms, especially in the areas of investment climate, labor markets, and governance.

Bibliographic Details

Main Author:	World Bank
Format:	Report biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2012-12
Subjects:	ACCESS TO MARKETS, AGRICULTURAL ACTIVITIES, AGRICULTURAL OUTPUT, AGRICULTURAL PRODUCTION, ARREARS, ASSET QUALITY, AUCTIONS, BAILIFF, BANK LENDING, BANK LINKAGES, BANK LOAN, BANKING SYSTEMS, BANKRUPTCY, BASIS POINTS, BENEFIT ANALYSIS, BIDS, BINDING CONSTRAINT, BOND, BOND SPREADS, BORROWING COSTS, BUDGET CONSTRAINTS, BUDGETING, BUSINESS CONFIDENCE, CAPITAL ADEQUACY, CAPITAL FLOWS, CAPITAL STOCK, CAPITALIZATION, CARBON, CASH FLOW, CENTRAL BANK, CHEMICAL INDUSTRY, CLIMATE CHANGE, COAL, COMMERCIAL REGISTRY, COMMODITY PRICES, COMPETITIVE TENDERS, CONFIDENCE OF LENDERS, CONTINGENT LIABILITIES, COUNTRY RISKS, CPI, CREDIT CRUNCH, CREDIT DEFAULT, CREDIT DEFAULT SWAP, CREDIT GROWTH, CREDIT INFORMATION, CREDIT LINE, CREDIT MARKET, CREDITWORTHINESS, CURRENCY MISMATCHES, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICITS, DEBT LEVELS, DEBT RESTRUCTURING, DEFICITS, DEPOSIT, DEPOSIT INSURANCE, DEPOSITOR, DEVELOPING COUNTRIES, DIVERSIFICATION, DOMESTIC CREDIT, EARNINGS, ECONOMIC ACTIVITY, ECONOMIC CLIMATE, ECONOMIC CRISIS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC OPPORTUNITIES, ECONOMIC SITUATION, ECONOMISTS, EDUCATION SYSTEMS, ELECTRICITY GENERATION, EMERGING MARKETS, EMPLOYER, EMPLOYMENT OPPORTUNITIES, ENERGY CONSUMPTION, ENERGY EFFICIENCY, ENFORCEMENT OF CONTRACTS, ENVIRONMENTAL, ENVIRONMENTAL PROTECTION, EQUALITY, EQUITY ISSUES, EQUITY MARKETS, ETHNIC GROUPS, ETHNIC MINORITIES, EXPENDITURE, EXPORT GROWTH, EXPORT PERFORMANCE, EXTERNAL BORROWING, EXTERNAL DEBT, EXTERNAL SHOCKS, FINANCIAL GLOBALIZATION, FINANCIAL INTERMEDIATION, FINANCIAL MARKET, FINANCIAL MARKETS DEVELOPMENTS, FINANCIAL OPENNESS, FINANCIAL RESOURCES, FINANCIAL SAFETY, FINANCIAL SERVICES, FINANCIAL SYSTEM, FINANCING REQUIREMENTS, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL POLICY, FLOATING EXCHANGE RATE, FOREIGN BANKS, FOREIGN CAPITAL, FOREIGN CURRENCY, FOREIGN CURRENCY DEBT, FOREIGN CURRENCY LOANS, FOREIGN DIRECT INVESTMENT, FOREIGN INVESTMENTS, FOREIGN INVESTORS, GLOBAL ECONOMY, GLOBALIZATION, GOVERNMENT BUDGETS, GOVERNMENT REVENUES, GRACE PERIOD, HIGH UNEMPLOYMENT, HOUSEHOLDS, HUMAN CAPITAL, INCOME TAX, INEQUALITIES, INFLATION, INSTITUTIONAL REFORM, INSURANCE, INTERNATIONAL BOND, INTERNATIONAL BOND ISSUES, INTERNATIONAL FINANCIAL INSTITUTIONS, INTERNATIONAL FINANCIAL MARKETS, INVENTORY, INVESTMENT BANK, INVESTMENT CLIMATE, INVESTMENT FUNDS, INVESTMENT RATES, INVESTOR PROTECTIONS, JOB CREATION, LABOR FORCE, LABOR FORCE PARTICIPATION, LABOR FORCE SURVEY, LABOR MARKET, LABOR MOBILITY, LEGAL ENVIRONMENT, LEGAL FRAMEWORK, LENDERS, LIMITED ACCESS, LIQUIDITY, LIVING STANDARDS, LOAN, LOAN MARKETS, LOAN QUALITY, LOAN-TO-DEPOSIT RATIOS, LOSS OF CONFIDENCE, MACROECONOMIC CONDITIONS, MACROECONOMIC STABILITY, MARKET CONFIDENCE, MARKET DISTORTIONS, METALS, MINIMUM CAPITAL REQUIREMENT, MINIMUM WAGE, NONPAYMENT, NONPERFORMING LOANS, OIL, OIL PRICES, PAYMENT OBLIGATIONS, PENSIONS, PERSONAL INCOME, POLITICAL STABILITY, PRICE CHANGES, PRICE VOLATILITY, PRIVATE INVESTMENT, PRIVATE INVESTORS, PRIVATIZATION, PUBLIC DEBT, PUBLIC FINANCES, PUBLIC INVESTMENT, PUBLIC SPENDING, REAL WAGES, RECESSION, REGISTRATION FEE, REGULATORY BARRIERS, REMITTANCES, REPAYMENT, RESERVES, RETURN, RETURN ON ASSETS, RISK MANAGEMENT, RULE OF LAW, SAFETY NET, SAVINGS, SHAREHOLDER, SOCIAL SECURITY, SOVEREIGN DEBT, SOVEREIGN RATING, STATE GUARANTEES, STOCKS, STRUCTURAL UNEMPLOYMENT, TAX, TAX COLLECTIONS, TAX TREATMENT, TRADE BALANCE, TRADING, TRANSACTION, TREASURY, UNEMPLOYMENT, UNEMPLOYMENT RATES, WAGES,
Online Access:	http://documents.worldbank.org/curated/en/298291468035472027/From-double-dip-recession-to-accelerated-reforms http://hdl.handle.net/10986/26832
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