Strategic Moves - Regional Environmental Center for Central and ...

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C H A P T E R 4
E C O N O M I C D E V E L O P M E N T A N D T H E E U A C C E S S I O N P R O C E S S
S T R AT E G I C M O V E S
The impact of the global economic recession on economic
development in SEE
The deep financial crisis and the contraction of global economic activity have had
a serious impact on SEE countries. This impact has been transmitted mainly through
a decline in investments, exports and consumption (World Bank website).
The growth trend recorded in SEE countries in recent years slowed down in
the second half of 2008 and is expected to continue to slow down throughout 2009.
According to the latest estimates, SEE countries demonstrated an average GDP
growth of 5.7 percent in 2008, lower than the 6.7 percent recorded a year earlier.
Industrial production saw the largest decline among economic sectors, showing a
drop of 21 percent. Croatia and Serbia, followed by the former Yugoslav Republic
of Macedonia and Bosnia and Herzegovina, were most affected by the crisis. Forecasts
for 2009 are also pessimistic, as the negative implications of the economic crisis
were more pronounced than was initially expected at the beginning of the year.
Growth projections suggest a significant decline in real GDP by 2.1 percent on average
(Kosovo Central Bank, Annual Report 2008), with the exception of Albania,
which is expected to grow by 0.4 percent in 2009. The economic slowdown is anticipated
to derive from a decline in credit in the real sector, and a further decline
in exports and foreign direct investments. The recession taking place in developed
countries will also substantially affect the level of remittances to SEE, which represent
an important source of financing in these countries. The inflationary pressures
experienced by EU countries in 2008 were also apparent in SEE, affected by
increases in oil and food prices since energy and food represent the largest share of
the consumer basket in the region. Annual average inflation reached 7.6 percent in
SEE in 2008, compared to 3.3 percent in the previous year. However, economic
projections for 2009 predict a significant decline in prices due to the global recession.
Price increases and the decline in exports triggered by the world economic
crisis resulted in a further deepening of the current account deficit in national
economies. The average current account deficit to GDP ratio was around 16.6 percent
in SEE in 2008, compared to 14.8 percent in the previous year. Foreign direct
investments declined in most countries in the region, accompanied by a significant
decline in exports. Furthermore, the recession in EU countries will significantly affect
tourism revenues.
General observations
• The transition to a market-based economy was delayed by around 10 years, beginning
only after 2000. This had a profound impact on the region’s competitiveness
and foreign investment flows.
• There was strong economic growth sustained at between 4 and 8 percent between
2004 and 2008. Levels of GDP (PPP) range from USD 2,600 in Kosovo