Regional Office for the Western Balkans

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Mission

The Regional Office for the Western Balkans, located in Vienna, Austria, was created to strengthen the IMF’s relationship with Albania, Kosovo, Montenegro, and Republic of North Macedonia. The objective of the office is to maintain a close engagement with the four countries as well as with donors, international institutions, including the World Bank, and the Austrian government, an important trade and development partner of the Western Balkan region.

Its main tasks include:

• Engaging with policymakers and other interlocutors on economic policies; as well as fostering a dialogue on global economic issues; 
• Supporting IMF operations in the Western Balkans, including policy advice, lending arrangements, technical assistance, and recruitment efforts;
• Helping to coordinate communication and outreach activities across the region.

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News

Combating the Impact of COVID-19 in Montenegro

 

July 02, 2020

 

Like many tourism-dependent countries, Montenegro has been hit hard from the effects of COVID-19. On June 24, 2020, the Balkan country received an emergency loan worth $83.7 million under the IMF’s Rapid Financing Instrument to help its economy weather the economic disruption caused by the collapse of tourism and to support higher health spending. Read more

 

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IMF Staff Concludes a Remote Staff Visit to Albania

 

July 01, 2020

Due to the fallout of the earthquake and the COVID-19 pandemic, Albania’s economy is expected to contract sharply in 2020 and rebound in 2021. But uncertainty is high.

Temporary, targeted, and transparent support for people and firms hurt by the shocks is warranted and needs to be embedded in a credible medium-term fiscal framework.

Once the effects of the shocks subside, it will be critical to resume revenue-based fiscal consolidation and put public debt on a sustained downward path to rebuild room for fiscal policy maneuver.

Read more

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Montenegro : Request for Purchase under the Rapid Financing Instrument; Press Release; Staff Report; and Statement by the Executive Director for Montenegro

June 25, 2020

The COVID-19 pandemic will hit Montenegro hard, as tourism is a key industry. Fiscal space has eroded in recent years due to large public capital outlays, and the COVID-19 crisis is creating new budgetary strains as health spending and other expenditures rise, while the economic contraction lowers revenues.

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Republic of North Macedonia : Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Republic of North Macedonia

 

April 21, 2020

 

North Macedonia’s economic outlook has deteriorated substantially due the COVID-19 pandemic. Real GDP is expected to decline by 4 percent due to a fall in both domestic and external demand. This, together with negative shocks to confidence and spillovers from global financial channels, has created an urgent balance of payments need. The elections planned for April 2020 have been postponed, implying that the caretaker government will remain in place for the next months. The Executive Board concluded the 2019 Article IV consultation on a lapse-of-time basis on January 22.

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Albania : Request for Purchase under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for Albania

 

April 17, 2020

 

Albania has been hit by two consecutive major shocks. On November 26, 2019 Albania was struck by a severe earthquake that killed 51 people and caused significant physical damage. In addition, the ongoing COVID-19 pandemic is severely disrupting economic activity, with the expectation of sharp declines in tourism, FDI, remittances, and temporarily restrained financing amid a tightening of global financial conditions. The authorities’ policy response to the shocks has been timely and targeted. Nonetheless, real GDP is expected to contract severely this year. The earthquake and COVID-19 pandemic, and the planned fiscal expansion to help cushion these shocks, have created urgent fiscal and external financing needs.

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Republic of Kosovo : Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Kosovo

 

April 16, 2020

 

The outbreak of COVID-19 in Europe and the associated containment measures will severely curtail growth to -5 percent in 2020. Tourism receipts, remittances, exports of goods, and FDI are all expected to plummet due to travel restrictions and the effect of the pandemic in trading partners and remittance-originating countries. Domestic containment measures and heightened uncertainty will hit demand. The authorities’ policy response to the shocks has been timely and targeted. The impact of the pandemic and the fiscal measures to help cushion these shocks have created urgent fiscal and external financing needs.

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The IMF Approves Disbursements for Albania, North Macedonia, and Kosovo

April 10

The IMF approves disbursements for Albania, North Macedonia, and Kosovo to provide much-needed financial assistance for health expenditures and for supporting households and firms affected by the crisis. The IMF financing also aims at catalyzing further assistance from the international community:

• IMF Executive Board Approves US$56.5 Million in Emergency Support to the Republic of Kosovo to Address the COVID-19 Pandemic
• IMF Executive Board Approves US$190.5 Million in Emergency Support to Albania to Combat COVID-19 Pandemic
• IMF Executive Board Approves EUR 176.53 Million in Financial Support for the Republic of North Macedonia
  

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IMF Staff Concludes Additional Talks on 2019 Article IV Consultation with Albania

March 13

An International Monetary Fund (IMF) team, led by Mr. Jan Kees Martijn, concluded remotely additional discussions with Albania on the 2019 Article IV consultation. The first round of these discussions was held in November 2019, but after the end-November earthquake, changes in the economic outlook and economic policies required further discussions. Read more

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Research and Papers

North Macedonia—Income Convergence and EU integration 

January 27, 2020

Although growth has been solid in the past two decades, it has not been enough to substantially narrow North Macedonia’s income gap with the European Union (EU). Based on the experience of other countries, joining the EU, which North Macedonia is aspiring to, has the potential to strengthen growth prospects. Read more

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Lifting Growth in the Western Balkans : The Role of Global Value Chains and Services Exports

November 18, 2019

This paper focuses on how the countries in the Western Balkans could lift exports through stronger integration with global value chains (GVCs) and broadening of services exports. The experience of countries that joined the European Union in or after 2004 shows that participation in GVCs can help small economies accelerate export and income growth. Read more

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Demographic Headwinds in Central and Eastern Europe

July 15, 2019

populations of Central and Eastern European (CESEE) countries—with the exception of Turkey—are expected to decrease significantly over the next 30 years, driven by low or negative net birth rates and outward migration. These changes will have significant implications for growth, living standards and fiscal sustainability. Read more

Reassessing the Role of State-Owned Enterprises in Central, Eastern and Southeastern Europe

June 18, 2019 

The Central, Eastern, and South Eastern European (CESEE) region is ripe for a reassessment of the role of the state in economic activity. The rapid income convergence with Western Europe of the early 2000s was not always equally shared across society, and it has now slowed dramatically in many countries of the region. Read more

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Public Infrastructure in the Western Balkans : Opportunities and Challenges

April 17, 2018                                    

An assessment of public infrastructure development in the Western Balkans. The paper quantifies the large gaps across various sectors/dimensions, evaluates current infrastructure plans, and discusses funding options available to countries in the region. Read more

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Western Balkans: Increasing Women's Role in the Economy

September 1, 2017

The Western Balkan countries have some of the lowest female labor force participation and employment rates across Europe. Almost two-thirds of working age women in the region are either inactive or unemployed: a huge bite into human capital for a region that endures high emigration and faces declining working age population. Read more

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Emigration and Its Economic Impact on Eastern Europe

July 2016

This paper examines the effects of emigration on private sector activity, competitiveness, public finances, and ultimately, growth in Central, Eastern, and Southeastern Europe (CESEE) economies as well as the pace of their income convergence to Western Europe. Read more

Cross-Country Report on Minimum Wages : Selected Issues

June 15, 2016

This paper provides a cross-country report on minimum wages. In the past few years, many countries in Central Eastern and Southeastern Europe (CESEE) have increasingly turned to minimum wage policies. Read more

 

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IMF and the Western Balkans

 

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Conferences and Events

Navigating the Future in Central, Eastern and Southeastern Europe

The IMF and the Croatian National Bank (CNB) joined efforts again to organize a new edition of the joint conference that took place in Dubrovnik two years ago. This year's conference focused on labor market and demographic challenges, the future of labor, and policies needed to sustain growth and promote convergence. The conference, held in Dubrovnik from July 14-15, was an opportunity to engage with key regional participants on these important topics. Learn more

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Regional Economic Outlook

Europe

November 2019

Global trade and manufacturing have weakened and so have these sectors in Europe. The evolution of European growth depends on two forces. On the one hand, European exports are softening and prospects for a recovery in global trade are not as strong as they were six months ago. On the other hand, easier financial conditions, expansionary fiscal policy in many countries, and still-strong labor markets are supporting domestic demand. This support is stronger in the newer EU Member States. On balance, near-term growth in Europe is projected to slow from 2.3 percent in 2018 to 1.4 percent in 2019—the lowest growth rate since 2013—and rebound to 1.8 percent in 2020. Amid high uncertainty, risks to the outlook remain to the downside, with a no-deal Brexit the key risk in the near term. Monetary policy should remain accommodative where inflationary pressures are still subdued, which is the case in most European economies. The potential side effects from such policy on financial stability should be carefully monitored. Fiscal policy should continue to be guided by medium-term objectives. But plans for stimulus in case of a sharper downturn should be at the ready, not least because the scope for effective monetary action has diminished. Countries with ample fiscal space should implement fiscal measures that boost potential growth. Reinvigorating structural reforms remains vital to raise subdued potential output growth and address long-term challenges, such as demographics.

Wages have been rising faster than productivity in many European countries, yet signs of underlying consumer price pressures remain limited. To shed light on this puzzle, Chapter 2 examines the link between wage growth and inflation in Europe and the factors that influence the strength of the passthrough from labor costs to consumer prices. The chapter finds that, historically, wage growth leads to higher inflation, but the impact has weakened since 2009. The passthrough is significantly lower in periods of subdued inflation expectations, greater competitive pressures, and robust corporate profitability. These findings suggest that the recent pickup in wage growth is likely to have a more muted impact on inflation than in the past.

Read the report