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The Western Balkans:
Impact of the Crisis on Living
Standards
Jane Armitage
Country Director and Regional Coordinator for
South East Europe
The slowdown is sharpest in ECA
compared with other emerging regions
GDP growth (annual percent change)
8.0
6.0
2009
2010
4.0
2.0
0.0
LAC
CEE
Easia
MENA
South Asia
SSA
-2.0
-4.0
-6.0
2
Impact of the Crisis on Poverty (i)
Western Balkans simulations
Impact of the Crisis on Poverty (ii)
% increase in poverty due to the crisis
Households are affected by the crisis in
multiple ways and at different times
Financial Market
Product Market
Labor Market
Government Services
Credit Market
Shock
Relative Price Shock
Income/Employme
nt Shock
Education, Health, SP
Service Shocks
5
Increase in poverty is tightly linked to changes
in the labour market – Example, Serbia
Trends in poverty, percentage of
population
Changes in labour market indicators
Oct 08-April 09, percentage points
8.0
3.0%
7.0
2.0%
6.0
1.0%
5.0
4.0
0.0%
Employment rate
3.0
-1.0%
2.0
-2.0%
1.0
0.0
2008_Q3
2008_Q4
2009_Q1-Q2
-3.0%
Unemployment rate
Inactivity rate
Remittances – Kosovo example
On average each
month they are
equivalent to 2/3 of
monthly wage (€ 224)
300
Figure Remittances last month by area (€)
Urban
National
239
224
187
200
125
They account for 30
percent or more of
household monthly
expenditure - more in
rural areas
Rural
125
100
100
0
median
mean
BUT more than half the households expect large
reductions in remittances
The crisis weakened Governments’ abilities to
support households given sharp increases in fiscal
deficits
(in percentage of GDP)
8
6
4
2
2007
0
Albania
-2
-4
-6
-8
Bosnia
FYR M acedonia
Montenegro
Serbia
2009
Social protection spending, second only
to the OECD
ECA spends a lot on public pensions (percent of GDP)
9
But reasonable targeting
Not all goes to poor, but accuracy compares favorably with programs in other regions
10
Going forward
o Further support from the development partners is needed.
o This includes both financing and technical assistance in order to
strengthen institutions and implement reforms which were pending for a
while, but now we see renewed interest from the governments.
o The World Bank provides significant budget support (DPL operations)
along with a number of investment operations and technical assistance
activities.
o Amounts of DPLs per country are:
• Albania USD 30 million, TBD
• Bosnia USD 96 million, TBD
• Croatia USD 290 million
• Kosovo (SEDPP) USD 85 milion
• Macedonia USD 30 million
• Montenegro USD 85 million, TBD
• Serbia two DPLs USD 100 million each