According to estimates from the analysis, the average growth of gross domestic product (GDP) in Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia, Kosovo, and Albania this year is expected to be around 2.6 percent, which is a significant decline compared to 2022, when GDP grew at a rate of four percent.
The largest decline in GDP is estimated for North Macedonia, where it is expected to be at 2.4 percent this year, while Kosovo has the best prospects, with GDP in 2023 expected to be at 3.7 percent, which is actually an increase of 0.2 percent compared to 2022. Montenegro also has a solid rating, as the World Bank forecasts GDP growth of 3.4 percent for it.
– The outlook for the Western Balkans remains unfavorable, and GDP growth is expected to slow to 2.6 percent in 2023, primarily driven by private consumption, exports, and in some countries, public investments – the analysis states.
Inflation in the Western Balkans in 2022 was at its highest level in the past two decades, and price pressures remained elevated at the beginning of 2023, the report states. In most Western Balkan countries, inflation measured by the consumer price index peaked at the end of 2022, influenced by rising energy and food prices, and is now showing signs of easing. However, inflationary pressures remain deeply rooted, necessitating further tightening of monetary policy.
The rise in prices has particularly affected low-income households, which, along with weaker economic growth, has significantly slowed the pace of poverty reduction. Among potential future constraints could be lower external demand, which would negatively impact export revenues and limit the inflow of remittances from abroad.
The World Bank, however, assesses that the medium-term outlook for the Western Balkans remains positive, provided that reforms are implemented to accelerate the “green” transition and address key structural challenges.
