How the Western Balkans Can Catch Up

44 Pages Posted: 8 Feb 2018

See all articles by Peter Sanfey

Peter Sanfey

European Bank for Reconstruction and Development (EBRD)

Jakov Milatovic

European Bank for Reconstruction and Development (EBRD)

Ana Kresic

European Bank for Reconstruction and Development (EBRD)

Date Written: January 7, 2016

Abstract

Countries in the Western Balkans – Albania, Bosnia and Herzegovina, FYR Macedonia, Kosovo, Montenegro and Serbia – all aspire to membership of the European Union, but they face a major convergence challenge in terms of living standards. The main reason behind this prosperity gap lies in the failure over the years of Western Balkans countries to be competitive, meaning that they lack the appropriate factors and institutions needed for high levels of long-term productivity. The key issue is whether the Western Balkans countries can narrow the gap in the coming decade and, if so, what do they need to do to achieve this.

The vital requirement for catching up with the rest of the European Union is a boost to investment in the region. The Western Balkans have a number of attractive features for investors. The long-term EU perspective is a major plus and a unique quality of the region compared with other emerging markets, as it helps to anchor market-oriented reforms and European standards. Strong macroeconomic stability, strategic geographic location, diverse economies, favourable tax regimes and low unit labour costs, combined with a relatively well-educated population, are common attributes throughout the region.

Looking ahead, sources of growth include trade integration, within the region and with the rest of the world, exploitation of the region’s energy resources, improvement of the transport infrastructure and technological innovation. However, long-term challenges remain, such as the possibility of a slowdown in reforms, risks posed by financial instability, adverse demographic trends and climate change. But provided governments in the region remain committed to reforms and regional cooperation, these challenges can be mitigated, if not overcome.

Keywords: Western Balkans, Competitiveness, Investment, Development

JEL Classification: F1, P0

Suggested Citation

Sanfey, Peter and Milatovic, Jakov and Kresic, Ana, How the Western Balkans Can Catch Up (January 7, 2016). EBRD Working Paper No. 185, Available at SSRN: https://ssrn.com/abstract=3119685 or http://dx.doi.org/10.2139/ssrn.3119685

Peter Sanfey (Contact Author)

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom
+44 20 7338 6227 (Phone)
+44 20 7338 6110 (Fax)

Jakov Milatovic

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Ana Kresic

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
161
Abstract Views
804
rank
249,724
PlumX Metrics