The Economist: Balkan Economies Mostly Miserable
Views on BG | June 21, 2012, Thursday| 496 views
According to the Economist, in Bulgaria unemployment remains at a relatively modest 11% but only because Bulgarians, unlike their non-EU Balkan neighbours, have the option to move to other EU countries to work. File photo
The Economist
IN the past decade or so Balkan pollsters have asked people in the region every single question imaginable. When they drew their conclusions they seem almost surprised by what they found, despite the fact that people consistently tell them exactly the same things. That is, that in general, and with the exception of Kosovars and Albanians who are generally younger and hence more optimistic, most people in the Balkans feel pretty miserable.They are concerned about jobs, health care, the education of their children and pensions. These material worries preoccupy them much more than ethnic grudges or the desire to reconquer territory they believe their nation has lost to a neighbour.
Most people have good reason to feel depressed about the economy. As Laza Kekic from the Economist Intelligence Unit, The Economist's sister organisation, told a recent conference in Sofia, Balkan economies have always been poorer than their western and northern counterparts. They have only prospered when these economies do well and they have suffered when they have suffered. The current crisis is no exception.
This week an analysis from the EIU notes that the Balkan transition economies, which means Albania, Bosnia, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia, "suffered the most from the global recession of 2008-09. Real GDP in the Balkans contracted by 5.2% in 2009 and the recession lasted into 2010, with average GDP falling by 0.4%". This was partly because Romania, the largest of the Balkan economies, dragged the average figure down.
Last year most of the countries of the former Yugoslavia and Albania actually grew modestly. Serbia's economy grew by 1.6%. Macedonia grew by 3%, Bosnia by 1.2% and Montenegro by 2.2%. This year however the rate of growth is forecast to fall. Croatia's economy did not grow at all in 2011 and is expected to contract by 0.6% in 2012.
While some countries would be delighted with even modest growth the main problem for the Balkans is a lack of jobs. In Serbia, the biggest country in the western Balkans, unemployment in November 2011 was 24%, an increase of 10% compared with four years earlier. In Bulgaria unemployment remains at a relatively modest 11% but only because Bulgarians, unlike their non-EU Balkan neighbours, have the option to move to other EU countries to work. About one million Bulgarians are believed to be working abroad, including 600,000 in Spain.
All the Balkan economies are intimately connected to the euro zone so the decline in demand from the euro zone has hit their economies hard. For example, in January, US Steel returned the privatised Smederevo steel plant in Serbia to the government for $1 because of a collapse in demand for its products. The Smederevo factory employs 5,400 people.
It is not all gloom though. Serbia has seen an increase in foreign direct investment and the early signs are that this could be a bumper tourist season on the Croatian coast. Still, alarms bells are ringing, especially in countries entwined with the ailing Greek economy and, to a lesser extent, the anemic Italian one. The EIU notes that Montenegro, Macedonia, Bulgaria and Albania export between 10-12% of their goods to Greece.
"For remittances, Albania is the most exposed; around two-thirds of migrants in Greece are from Albania. Macedonia, Serbia and Bulgaria are the most vulnerable to reduced FDI flows. The Greek banking subsidiaries in the region are a significant channel of contagion; Greek banks' market share in south-eastern Europe is about 20%"
Wherever you go in the region people tell you how tough life is. Average salaries are €491 in Montenegro, €360 in Serbia and at similar levels elsewhere. By contrast prices are high and increasing, especially for utilities. With "plunging incomes, rising poverty and unemployment, the political consequences of this and the incidence of social unrest in the region have been remarkably limited thus far," notes the EIU. How can this be explained? The EIU sees three sets of factors at work.
"First, the region has some advantages of backwardness that cushion the region's populations from the impact of the economic downturn. This includes relatively large agricultural sectors and the important role of extended families. Second, the demise of the traditional left and of trade unions in most countries of the region means that there are few social and political forces that can provide a focus for and organise large non-spontaneous demonstrations. Finally, opinion surveys reveal that widespread apathy, not conducive to social activism, remains the dominant trend in the region. "
The big question is whether this is sustainable. "Are we merely witnessing the calm before the storm, to be unleashed by an intensification of the economic crisis in the European and the Balkan economies, and that at a time when one factor that was meant to stabilise the Balkans, the EU, is in the midst of its own crisis?" asks the EIU. The economic future of the Balkans depends largely on the fate of the euro zone.
IN the past decade or so Balkan pollsters have asked people in the region every single question imaginable. When they drew their conclusions they seem almost surprised by what they found, despite the fact that people consistently tell them exactly the same things. That is, that in general, and with the exception of Kosovars and Albanians who are generally younger and hence more optimistic, most people in the Balkans feel pretty miserable.They are concerned about jobs, health care, the education of their children and pensions. These material worries preoccupy them much more than ethnic grudges or the desire to reconquer territory they believe their nation has lost to a neighbour.
Most people have good reason to feel depressed about the economy. As Laza Kekic from the Economist Intelligence Unit, The Economist's sister organisation, told a recent conference in Sofia, Balkan economies have always been poorer than their western and northern counterparts. They have only prospered when these economies do well and they have suffered when they have suffered. The current crisis is no exception.
This week an analysis from the EIU notes that the Balkan transition economies, which means Albania, Bosnia, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia, "suffered the most from the global recession of 2008-09. Real GDP in the Balkans contracted by 5.2% in 2009 and the recession lasted into 2010, with average GDP falling by 0.4%". This was partly because Romania, the largest of the Balkan economies, dragged the average figure down.
Last year most of the countries of the former Yugoslavia and Albania actually grew modestly. Serbia's economy grew by 1.6%. Macedonia grew by 3%, Bosnia by 1.2% and Montenegro by 2.2%. This year however the rate of growth is forecast to fall. Croatia's economy did not grow at all in 2011 and is expected to contract by 0.6% in 2012.
While some countries would be delighted with even modest growth the main problem for the Balkans is a lack of jobs. In Serbia, the biggest country in the western Balkans, unemployment in November 2011 was 24%, an increase of 10% compared with four years earlier. In Bulgaria unemployment remains at a relatively modest 11% but only because Bulgarians, unlike their non-EU Balkan neighbours, have the option to move to other EU countries to work. About one million Bulgarians are believed to be working abroad, including 600,000 in Spain.
All the Balkan economies are intimately connected to the euro zone so the decline in demand from the euro zone has hit their economies hard. For example, in January, US Steel returned the privatised Smederevo steel plant in Serbia to the government for $1 because of a collapse in demand for its products. The Smederevo factory employs 5,400 people.
It is not all gloom though. Serbia has seen an increase in foreign direct investment and the early signs are that this could be a bumper tourist season on the Croatian coast. Still, alarms bells are ringing, especially in countries entwined with the ailing Greek economy and, to a lesser extent, the anemic Italian one. The EIU notes that Montenegro, Macedonia, Bulgaria and Albania export between 10-12% of their goods to Greece.
"For remittances, Albania is the most exposed; around two-thirds of migrants in Greece are from Albania. Macedonia, Serbia and Bulgaria are the most vulnerable to reduced FDI flows. The Greek banking subsidiaries in the region are a significant channel of contagion; Greek banks' market share in south-eastern Europe is about 20%"
Wherever you go in the region people tell you how tough life is. Average salaries are €491 in Montenegro, €360 in Serbia and at similar levels elsewhere. By contrast prices are high and increasing, especially for utilities. With "plunging incomes, rising poverty and unemployment, the political consequences of this and the incidence of social unrest in the region have been remarkably limited thus far," notes the EIU. How can this be explained? The EIU sees three sets of factors at work.
"First, the region has some advantages of backwardness that cushion the region's populations from the impact of the economic downturn. This includes relatively large agricultural sectors and the important role of extended families. Second, the demise of the traditional left and of trade unions in most countries of the region means that there are few social and political forces that can provide a focus for and organise large non-spontaneous demonstrations. Finally, opinion surveys reveal that widespread apathy, not conducive to social activism, remains the dominant trend in the region. "
The big question is whether this is sustainable. "Are we merely witnessing the calm before the storm, to be unleashed by an intensification of the economic crisis in the European and the Balkan economies, and that at a time when one factor that was meant to stabilise the Balkans, the EU, is in the midst of its own crisis?" asks the EIU. The economic future of the Balkans depends largely on the fate of the euro zone.
Tags: Bulgaria, unemployment, Bulgarians, non-EU, Balkan, countries, EU, FDI, greece, Albania, Bosnia, Croatia, macedonia, Montenegro, Romania, Serbia, recession, GDP, economies
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