Brussels, 26/01/2004 (Agence Europe) - A Commission report on "The Western Balkans in Transition" acknowledges that the Western Balkans achieved another year of good economic performance in 2003, although much more remains to be achieved in all sectors. The report published on Friday was prepared by the Commission's Directorate-General for Economic and Financial Affairs. It analyses structural and macro-economic transition in the Western Balkans (Albania, Bosnia Herzegovina, Croatia, Macedonia, Serbia and Montenegro and Kosovo) and notes encouraging trends while admitting that the overall situation is far from smooth. Croatia stands out from the other countries as having considerably higher economic growth.
Positive results noted in the report comments that GDP growth is estimated at slightly above 4% and inflation below 5%. Public finances maintained a positive trend of fiscal consolidation (particularly in Bosnia Herzegovina and Macedonia), recording an estimated average regional deficit of around 4% of GDP. In 2003, Foreign Direct Investment flows to the Western Balkans are estimated to have reached almost EUR 3 billion, which is equivalent to around EUR 130 per capita or 5.4% of regional GDP, with Croatia clearly in the lead. While the Western Balkans attracted on average per year much less per capita FDI (EUR 80) than the acceding countries (EUR 236) in 1997-2002, in terms of annual average FDI to GDP ratio (3.9%) they come close to the acceding countries' average (4.9%). The countries of the region made some steps forward in the process of market-oriented reforms, in particular in the area of privatisation of Small and Medium sized Enterprises (SMEs) and trade liberalisation.
External imbalances remain fairly large in all the Western Balkan countries. For the whole region, the 2003 current account deficit is estimated to have averaged around 8% of GDP, whereas the trade deficit reached an estimated 28% of GDP. This is particularly pronounced in Bosnia Herzegovina, Albania and Serbia Montenegro and leaves the countries in question very vulnerable. Croatia is in a different situation because it is able to finance its own deficit.
The report lists areas where progress must still be made in the next few year such as privatising big corporations, reforming the administration and management of public finances, enabling SMEs to access the financial markets, moving closer to EU standards (particularly in banking) and implementing existing legislation.