Effects of global economic downturn on the Balkans
29. January 2010. | 05:57
Global financial crisis not only pushed the Balkans into an economic contraction but also had a negative impact on the bilateral relations of regional countries.Deepening economic cooperation among the Balkan countries may well be a new beginning for the region.
The Balkan countries, following the painful period of transformation of the 1990s, enjoyed an average growth rate of over 5 percent in the first years of 2000s. The thing is that the global economic downturn caught the Balkans off guard.
The crisis not only pushed the Balkans into an economic contraction but also had a negative impact on the bilateral relations of regional countries. Deepening economic cooperation among the Balkan countries may well be a new beginning for the region.
The main economic effects of the global financial crisis on the Balkans were seen in increased unemployment and deepened fears among the peoples of losing jobs. Unemployment was a serious problem in the Balkans all along. In 2007, for example, the joblessness rate was 43 percent in Kosovo, 35,2 percent in FYRMacedonia, 30 percent in Montenegro and 29 percent in Bosnia Herzegovina. Industrial production contracted considerably because of the global financial slump and exports steadily dwindled. The loans given to the private sector showed a downward trend, the flow of remittances from the Diaspora faltered and direct foreign investment diminished as against the previous years.
According to the estimates of the European Construction and Development Bank, direct foreign investments in 2009 in Albania, Bosnia Herzegovina, Bulgaria, FYRMacedonia, Montenegro, Romania and Serbia were almost half of the total of 2007, which was 27,74 billion dollars.
The unfavourable reflections onto the Balkans of the global economic meltdown were also seen in other areas. The western Balkans countries slanted for EU full membership were obliged to slow down their reform movements. The EU, committed to fighting the fallout from the economic slump, clean forgot about the Balkans, as a result of which the peace process and efforts to resolve the existing disputes all but came to a standstill. Given the overall impact of the global economic crisis, it wouldn't be exaggeration to say that the worst victims of the global slump turned out to be the West Balkan countries.
Balkan countries are divided into two sub groups in terms of the economic rules under implementation.
The first group is comprised of Greece, Bulgaria and Romania, all EU members. It is the EU rules and regulations which are implemented in the markets of these three countries. That is to say that doing business in Greece, Bulgaria and Romania is contingent on attaining different standards and getting specific permissions. All this may constitute a barrier standing in the way of the development of regional trade and economic relations.
Albania, Bosnia Herzegovina, Croatia, Montenegro, Kosovo, FYRMacedonia and Serbia make up the second group. The second group Balkan countries, save for Albania, were under the roof of the same state until the beginning of 1990s. The same regulations, laws and standards were used in their markets. Therefore, conditions in the second group of countries in terms developing economic cooperation seem to be more favourable than in others.
The Central European Free Trade Agreement, CEFTA for short, is the biggest gain scored in the West Balkan states in terms of economic cooperation. Apart from this, the EU has signed with the West Balkan states the Energy Community Agreement and work is underway for the signing of a Transport Community Agreement.
However, non-tariff obstacles are a serious stumbling block to the liberalization of trade in the West Balkan states. On the other hand, as a convenient legal and institutional framework has not as yet been translated into life, there are some solid difficulties in the West Balkan states' cooperation in energy and transportation.
The Chambers of Trade and Industry in the West Balkan states can play a leading role in the settlement of these problems. The thing is that the Chambers of Trade and Industry have to devise a way of increasing their influence over national governments, regional initiatives and EU institutions.
The industries of West Balkan states are far from meeting the import demands of the EU. However, conditions are much better for catering to in-region demands.
The Chambers of Trade and Industry can also spearhead and encourage the manufacturing of industrial products at regional level. If the number of companies materializing the various stages of production in different countries of the Balkans increases, investments and industrial production may also be re-activated.
As economic relations deepen in this way in the West Balkan states, bilateral relations can also be placed on sounder foundations