The Western Balkans region is recovering from the 2020 recession induced by COVID-19, thanks to a faster-than-expected recovery in 2021, according to the latest edition of the Western Balkans Regular Economic Report, Greening the recovery.
The outlook for the region has improved considerably, with GDP growth now projected at 5.9% in 2021, after contracting 3.1% in 2020. Growth in the region is projected at 4.1% in 2022 and 3.8% in 2023.
In Bosnia and Herzegovina, real GDP is expected to grow by 4% in 2021 after contracting by 3.2% in 2020. As the economy of Bosnia and Herzegovina rebounds in 2021, improvements in market participation in the jobs and jobs will remain essential for growth to translate into poverty reduction.
It will be essential to address the bottlenecks that cause persistent long-term unemployment, such as improving participation in the formal labor market, especially for women, and reducing mismatch. skills of young people. The report also notes that institutional and governance reforms remain important challenges on the development path of Bosnia and Herzegovina and on the path to EU membership.
“The COVID-19 pandemic has made the implementation of much-needed structural reforms in Bosnia and Herzegovina all the more urgent,” said Christopher Sheldon, World Bank country director for Bosnia and Herzegovina and Montenegro. “The World Bank is committed to helping the governments of Bosnia and Herzegovina develop long-term solutions that will build a more resilient and inclusive economy in the post-pandemic era, by improving human capital, increasing efficiency the public sector, enabling the growth of the private sector and reducing the country’s vulnerabilities to climate change.
The region-wide recovery is driven by strong domestic and foreign demand. A sharp rebound in domestic consumption and travel across Europe helped boost remittances as well as tourism inflows during the peak summer season of 2021. A strong recovery in advanced economies also boosted demand for tourism. exports from the region.
However, the recovery remains fragile. Early warning signals from the labor market call for special political attention. Job losses due to the recession and its aftermath have disproportionately affected women and young people, potentially delaying efforts to raise the region’s still low labor market participation rates. Youth unemployment reached 37.7% in 2021, up 5.4 percentage points from June 2020, further worsening employment prospects for young people.
“As the countries of the Western Balkans envision a post-pandemic future, their policy approach will need to focus on the main obstacles to job creation and economic transformation, including the green transition,” said Linda Van Gelder, World Bank Country Director for the Western Balkans. . “The six countries would benefit from reforms of the business environment, governance and digitization, which would contribute to growth and close the gap with the countries of the EU.”
The report also examines the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now finds itself at a key decision point regarding the impending green transition.
Global progress towards climate action is causing fundamental changes in society. Consumer and investor preferences are changing, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, the greening of a country’s economy becomes a decisive factor in international competitiveness and the ability to attract international finance and investment.
The Western Balkans are no exception. Still characterized by a development model oriented towards familiar brown industries, moving towards a green growth path is far from easy, especially in the short term. Yet the green transition offers significant opportunities for the Western Balkans, including closer integration into Eurocentric global value chains and access to significant EU resources to help finance a green transition.
The effective management of this green transition, including the many political compromises, will have to be at the heart of the political attention of the Western Balkans in the years to come.