Economic developments in the Western Balkans and in Macedonia. World Bank Vienna June 16, 2016

Transcription

1 Economic developments in the Western Balkans and in Macedonia World Bank Vienna June 16, 216

2 MAIN MESSAGES : ECONOMIC DEVELOPMENTS IN THE WESTERN BALKANS 1

3 Main Messages for Wester Balkans Economic growth rebound, with increases in employment and reduction of poverty Early signs of rebalancing from unsustainable consumption-fueled growth to more sustainable investment and export-led growth Sustaining these positive trends require continued commitment to tackle macro-fiscal imbalances and implement structural reforms

4 Main Messages Macedonia Early adopter of successful structural reforms to support investment and export led growth but some momentum lost in 215 (political uncertainties?) Solid growth, however driven in 215 primarily by substantial public stimulus and FDI related exports; with contribution from private investments Positive movements on the labor market, with a need to improve job quality The fiscal deficit declined, but the structure of spending needs attention Public debt increased slightly; with rising tendency for the future

5 WESTERN BALKANS: A STRENGTHENING ECONOMIC RECOVERY 2

6 Growth rebounded in the Western Balkans in 215 Real GDP Growth, 214 and 215 Percent f SRB ALB BIH MNE KOS MKD SEE6 EU28 Sources: National statistics agencies, World Bank forecasts. 6

7 Also in Macedonia (but slow down expected in 216) driven by significant public stimulus Decomposition of real GDP growth, 215 Seasonally adjusted index of completed construction works Q1 214Q2 214Q3 214Q4 214Q1 215Q2 215Q3 215Q4 215Q1 216 Net exports Gross capital formation General government final consumption Household final consumption GDP growth Source: State Statistics Office and World Bank staff calculations Buildings Roads Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Source: State Statistics Office and World Bank staff calculations.

8 and FDI related export, the legacy of the MK s capacity of attracting FDI in recent years Contribution to export growth FDI related exports "Traditional" industries Source: National Bank of the Republic of Macedonia and World Bank staff calculations.

9 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Western Balkans: Jobs created, yet entrenched unemployment Employment Index, Q2 28=1 Unemployment, percent of labor force 13 Index, Q2 28 = ALB BIH MKD MNE SRB SEE Long-term Other KOS MKD BIH SRB MNE ALB Sources: Data from national statistical offices. Note: The regional total excludes Kosovo. Sources: Data from national statistical offices.

10 In Macedonia positive job creation, but average new jobs salaries still below average wages Earning structure of newly created jobs ( ) 31% 69% Below the average wage Above the average wage Source: State Statistics Office and World Bank staff calculations

11 Western Balkans: Job creation and lower inflation supported real incomes, helping to reduce poverty Percent, yoy Average period CPI inflation ALB BIH KOS MKD MNE SRB SEE6 Source: National statistical offices. Note: SEE6 is weighted average Projected evolution of $5/day PPP, 213=1, changes are in percent MNE ALB SEE4 weighted average Source: World Bank staff estimates. SER MKD

12 Sources of growth: Macedonia and other SEE6 countries vs. 15 Decomposition of real GDP growth, 215 Decomposition of real GDP growth, Percent KOS ALB SRB MNE MKD BIH Percent KOS ALB SRB MNE MKD BIH Consumption Investment Net exports Real GDP growth (%) Consumption Investment Net exports Real GDP growth (%) Source: Data from national statistical offices.

13 WESTERN BALKANS: COMPETITIVENESS, PRODUCTIVITY, EXPORT CAPACITY NEED TO CONTINUE TO BE STRENGHTEN TO SUPPORT A MORE SUSTAINABLE GROWTH MODEL AND EUROPEAN ASPIRATIONS 3

14 Kosovo BiH Albania Serbia Montenegro Macedonia, FYR Panama Malaysia Ireland Singapore Western Balkans: Competitiveness 25 Western Balkans: improving but low export levels and trading below potential Source: World Development Indicators, 215; World Bank estimates

15 Global connectedness is below rest of Europe (and fastgrowing Asia) Global connectedness score, Albania Source: DHL Bosnia and Herzegovina FYR Macedonia Serbia EU11 EU15 Singapore

16 Western Balkans trade facilitation and logistics also lower of European and global standards Timeliness Logistics Performance Index Score Customs and Clearance EU 15 Average Western Balkan Average Singapore Tracking & tracing Infrastructure for trade Logistics competence International shipments Source: World Bank, Logistics Performance Index

17 Doing Business MKD(rank 12) CRO (rank 4) MNE (rank 46) Doing Business: Distance to best performance frontier, 216 SRB (rank 59) KSV (rank 66) BIH (rank 79) Note: from =worst to 1=best practice frontier Source: Doing Business Report MK Key Problematic Factors for Doing Business: Access to finance Inadequately educated workforce Poor work ethic of workforce Inefficient government bureaucracy Complex tax regulations Source: GEF: Global Competitiveness Report MK Top Business Environment Obstacles for Firms: Practices of the informal sector Access to finance Political instability Tax rates Inadequately educated workforce Source: Enterprise Surveys 213, World Bank and EBRD 15

18 Macedonia s Export diversification and positive spillover (greater value added and increased sophistication) HS Product Code Increase in Select Exports Sector Trade Value in 1 US$ % Change Food Products 42, , Chemicals 69, , Plastics and Rubber 79, , Textiles and Clothing 712, , Machinery and Electrical Equipment 314,6.3 94, Transport 41, , Source: UNCOMTRADE Exports to EU27 countries increased from 211 to 214 Export Markets, % of total EU Western Balkans China Other Total Source: UNCOMTRADE Share of medium and high tech exports increased from 37 percent in 211 to 53 percent in 214 Spillovers of FDI in transport, logistics, construction, tooling, construction, etc. services, however still under potential. Challenges: Enable backward linkages from FDI and increase competitiveness of local firms to integrate in regional and global value chains. Increase survival rates of firms on export markets, in and particularly beyond the Western Balkans region.

19 WESTERN BALKANS: POSITIVE MEDIUM TERM OUTLOOK, WITH STRUCTURAL CHALLENGES TO SUSTAINABLE GROWTH 4

20 Fiscal deficits narrowed, but public debt high and rising Fiscal consolidation in the region is still slow Percent of GDP MNE ALB SRB MKD KOS BIH SEE PPG debt to GDP 27 to 215 Percent of GDP MNE SRB ALB MKD BIH KOS SEE6 Sources: Ministries of Finance and World Bank.

21 Well-capitalized and liquid system, but NPLs still a burden 25 2 Capital adequacy ratio Dec-14 Q3/Q4 215 Change Since Dec 214 Average (26-8) Capital adequacy ratio (percent) Percentage point change Nonperforming loans, percent of total loans Dec-14 Dec-15 3 Peak since 28 Pre crisis level (end 27) SRB KOS MNE MKD ALB BIH -1.5 SRB ALB BIH MNE MKD KOS Source: National authorities. Source: National authorities.

22 Western Balkans: How to sustain the rebalancing and nurture strong and inclusive growth for converge with EU? Income convergence SEE6 GDP per capita, PPP, internaitonal dollars, 211 relative to EU average, percent Source: World Bank staff calculations 2% 4.5% 6% 213 average annual growth until 235 FIVE-PRONGED POLICY AGENDA ensure macro stability: fiscal, external, financial address legacy of oversized and inefficient state, while improving quality and equity of public service delivery unleash productive potential of private sector and deepen global integration eliminate disincentives and barriers to formal jobs enhance resilience to natural shocks and sustainable use of natural resources 22

23 How to sustain the rebalancing and nurture strong and inclusive growth for converge with EU? Macedonia Resolution to the political uncertainties Resuming and intensifying structural reforms to continue to support business environment for investments and export driven growth Containing fiscal deficit and improving public finance management and efficiency of spending Further decline in poverty and unemployment and resuming the convergence process towards EU living standards

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