South East Europe Regular Economic Report, January 2015 : Coping with Floods, Strengthening Growth
2015
World Bank Group
Coping with Floods, Strengthening Growth, from the South East Europe Regular Economic Report explains that South East Europe s (SEE6) s economy is estimated to have stagnated in 2014 on the back of flood-induced contraction in Serbia and a sharp slowdown in Bosnia and Herzegovina and Montenegro. The regional economy grew 0.2 percent in 2014, insufficient to improve living standards or to make a dent in the region s high unemployment rate. External demand for SEE6 exports was a key positive contributor to economic growth in 2014 as the region s exports gained market share, despite the weak Eurozone performance and disappointing global recovery. Domestic demand remained subdued because of delayed or reduced public and private investments and weak consumption. Devastating floods in large parts of the region further weighed on the SEE6 economic activity in 2014. The weak regional economic performance masks notable differences among the SEE6 countries. In 2014, the Serbian economy is estimated to have contracted by 2 percent for a third time since the global crisis and Bosnia and Herzegovina is stagnating. Economic growth rates in Kosovo and Montenegro are estimated to have moderated in 2014. Only Albania and FYR Macedonia showed signs of a more sustained recovery on the back of increasing exports, particularly in the second half of the year. The floods were the main culprit behind the weak domestic demand and the overall sluggish economic performance in SEE6. Robust exports only partially offset the SEE6 s weak domestic demand, leaving external imbalances in vulnerability. The average fiscal deficit in SEE6 is estimated to have increased by 0.4 percent of GDP to 4.2 percent in 2014 due to faster growth in expenditures than revenues. The SEE6 region as a whole is projected to grow 1.3 percent in 2015, supported by a slowly recovering external demand, especially in Europe, and stabilization of international energy prices at around current levels.
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