South East Europe Six: From Double-Dip Recession to Accelerated Reforms

Economic Premise No. 103, Poverty Reduction and Economic Management, World Bank.

6 Pages Posted: 25 Oct 2013

See all articles by Zeljko Bogetic

Zeljko Bogetic

World Bank

Dilek Aykut

World Bank

Alexandru Cojocaru

World Bank

Damir Cosic

World Bank

Simon Davies

World Bank

Mike Edwards

World Bank

Agim Demukaj

World Bank

Borko Handjiski

World Bank

Caterina Ruggeri Laderchi

World Bank

Erjon Luci

World Bank

Sanja Madzarevic-Sujster

World Bank

Lazar Sestovic

The World Bank

Bojan Shimbov

World Bank

Kenneth R. Simler

World Bank - Poverty Reduction Group

Carolina Sanchez-Paramo

World Bank

Indhira Vanessa Santos

Harvard University - Harvard Kennedy School (HKS)

Arturo Guillermo Rivera

World Bank

Javier Suarez

Independent

Date Written: January 1, 2013

Abstract

This note discusses the external environment, economic outlook, and key policy challenges for the six South East European Countries (SEE6) — Albania, Bosnia and Herzegovina (BIH), Kosovo, the former Yugoslav Republic (FYR) of Macedonia, Montenegro, and Serbia — as they seek to reignite economic recovery. After two years of fragile recovery from the global recession, as a group, SEE6 countries experienced 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. The rise in unemployment continues to threaten the social fabric. Credit recovery and fiscal consolidation are under threat. Nonperforming loans (NPLs) — thought to be stabilizing only a few months ago — are again on the rise. As a result, both within and outside the region, the environment has become much more difficult to navigate, and the policy trade-offs necessary to stabilize economies and reignite growth have become more difficult to make. To overcome these challenges, SEE6 countries need more intensive policy reform to reduce public debt and accelerate structural reforms, especially in fiscal consolidation and the financial sector, labor markets, and business environment. Additional external financing from international financial institutions (IFIs) for growth and jobs could prove effective, but only if accompanied by intensified fiscal and structural reforms.

Keywords: Europe, South Europe, Eastern Europe, Balkans, Recession, Reform

JEL Classification: P27, O11, O52, O57

Suggested Citation

Bogetic, Zeljko and Aykut, Dilek and Cojocaru, Alexandru and Cosic, Damir and Davies, Simon and Edwards, Mike and Demukaj, Agim and Handjiski, Borko and Ruggeri Laderchi, Caterina and Luci, Erjon and Madzarevic-Sujster, Sanja and Sestovic, Lazar and Shimbov, Bojan and Simler, Kenneth R. and Sanchez-Paramo, Carolina and Santos, Indhira Vanessa and Rivera, Arturo Guillermo and Suarez, Javier, South East Europe Six: From Double-Dip Recession to Accelerated Reforms (January 1, 2013). Economic Premise No. 103, Poverty Reduction and Economic Management, World Bank.. Available at SSRN: https://ssrn.com/abstract=2343736

Zeljko Bogetic (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Dilek Aykut

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Alexandru Cojocaru

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Damir Cosic

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Simon Davies

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Mike Edwards

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Agim Demukaj

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Borko Handjiski

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Caterina Ruggeri Laderchi

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Erjon Luci

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Sanja Madzarevic-Sujster

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Lazar Sestovic

The World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Bojan Shimbov

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Kenneth R. Simler

World Bank - Poverty Reduction Group ( email )

1818 H Street, NW
Washington, DC 20433
United States

Carolina Sanchez-Paramo

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Indhira Vanessa Santos

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Arturo Guillermo Rivera

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Javier Suarez

Independent

No Address Available

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