The high foreign and the growing public debt of Serbia could be a channel through which the crisis in Europe will affect Serbia and this is why it is important to honor the rules of fiscal responsibility, World Bank economist Ron Hood said in Belgrade on Nov. 15.

"Fiscal consolidation is the key issue for Serbia and for other countries of the Western Balkans," he said during the presentation of the first "South East Europe Regular Economic Report," which covers Serbia, Kosovo, Bosnia-Herzegovina, Macedonia, Montenegro and Albania.

According to Hood, who is also the author of the report, deeper integration with the European Union remains the best prospect for economic growth of countries of the Western Balkans, despite the slowdown of the world economy and the turmoil in the euro zone.

"Growth predictions for the region are 2.5 percent in 2011 and 2.1 percent in 2012, but even such modest growth projections are based on the assumption that the crisis in the euro zone will be solved in an appropriate fashion," Hood said, warning that, if the crisis worsened, economic growth in the countries of the region could be much lower.

The report cites six indicators of vulnerability to spread of the debtors' crisis and the crisis in the euro zone onto the countries of the region, which show that Serbia is in at high risk according to financial connections, external debt level and the current account deficit.

Hood said that trade with the EU was the key driving force of exports and overall economic growth in the countries of the Western Balkans, and that it accounted for between 30 and 50 percent of their gross domestic product.