SARAJEVO, Oct 21 (Reuters) - The World Bank on Thursday
revised up its forecast for the economic growth of six countries
of the Western Balkans to 5.9% in 2021 after a 3.1% contraction
in 2020 due to the COVID-19 pandemic, but cautioned that
recovery remains fragile.
In its regular six-month report on the region, the lender
estimated that the economies of Albania, Bosnia, Kosovo,
Montenegro, North Macedonia and Serbia could grow 4.1% in 2022
and 3.8% in 2023.
"A faster-than-expected recovery is really driven by two
main factors: domestic re-opening triggered by various robust
recovery in domestic consumption and tourism-related demand and
then very strong external conditions," said Richard Record, the
lead country economist for the Western Balkans.
Record said that risks for maintaining the growth aligned
with the same factors if they were reversed, meaning that
consumption, remittances and tourism would be affected in the
case of new pandemic-related lockdowns or international
restrictions on movement.
In addition, the Western Balkan countries lag European
neighbours when it comes to COVID-19 vaccination, with rates
below 40% in most countries, except for Serbia and Kosovo.
Record said that the depleted fiscal space and high debt
levels will continue to weigh on the region, and that political
uncertainty will delay a recovery in both domestic and foreign
investment that the region needs to boost potential output.
The bank also said that the labour market was recovering at
a slower pace than the economy, and that structural reforms were
needed to address job creation and economic transformation,
including green transition.
Record said the report focused closely on macro-fiscal
challenges and drivers of greening the region's growth, which
called necessary but not easy to manage.
"The reality is that business as usual is no longer an
option, because we are seeing changing of external preferences,"
Record told Reuters.
(Reporting by Daria Sito-Sucic; Editing by Will Dunham)