Economy & Trade, Europe, Financial Crisis, Headlines, Labour

ECONOMY-BALKANS: Just When Hope Was At Hand

Vesna Peric Zimonjic

BELGRADE, Dec 18 2008 (IPS) - The Balkans region, crippled by the wars of the 1990s and then pushed through painful transition to a market economy, has been hit hard by the global economic crisis just when everyone believed the time had come for promising new development.

“For the first ten months of 2008, we have seen one of the best economic years for more than a decade,” Serbian Prime Minister Mirko Cvetkovic said at a press conference in Belgrade Wednesday. “However, the effects of the worst global crisis seem about to hit us as hard. This is a kind of crisis none of us has seen in our lives.”

Thousands have been laid off across Bosnia, Croatia, Serbia and Macedonia. Albania and Montenegro too have run into economic stagnation over the past couple of months.

The hardest hit are the metal processing and textile industries, together with tourism and services. The last two have been the big boost for economic growth, particularly in Croatia and Montenegro.

“The region cannot avoid the global crisis,” Nobel Prize winning economist Joseph Stiglitz said on a recent visit to Belgrade. He now heads an expert body for monitoring the financial crisis, set up by the United Nations General Assembly in September.

“Some countries will be hit directly on the trade level, others because of the fall of the price of raw materials,” he said. “This crisis began at the centre, in the U.S., but the periphery will be hit the most, because exports and direct foreign investments will suffer. The region depends on Europe, which will suffer even greater consequences than the U.S.”

“We are already witnessing that,” analyst Goran Nikolic told IPS. “Serbia relies on exports; food and raw materials such as copper and iron make 40 percent of exports. The price of copper dropped by half in the past two months.” The international conglomerate Rio Tinto, potential investors in the Serbia copper industry, announced last month that it will lay off more than 13,000 people worldwide.

“So, Serbia cannot expect much from there,” Nikolic said. Similarly with plans to sell Russia oil enterprises in Serbia worth some 400 million euros (572 million dollars). With Russia also in recession, prospects for that sale are now small.

Serbia’s deal with the Italian company Fiat to revive the car industry in the central town Kragujevac is also in doubt, with Fiat struggling to survive at home.

“If Serbia reaches 3 percent growth in 2009, that will be a success,” analyst Stojan Stamenkovic told IPS. “That is a major blow, as growth was around 7.5 percent for 2008, which is likely the figure for the region.”

Bosnia-Herzegovina and Croatia saw 6 percent growth in the first ten months of the year, Macedonia 5.2 percent and Montenegro 7 percent. All that is now expected to slow to less than half.

“It would be a miracle if Croatia reaches 2 percent growth next year,” analyst Zeljko Lovrincevic from the Economy Institute of Zagreb told local media. “There will be a dramatic fall of investment into tourism, construction and the ship building industry.” The three are the big engines of the Croatian economy.

“The slowdown in economic activity will last till the end of 2010 or beginning of 2011,” he added.

Fears are mounting that the high unemployment rate could go up. Bosnia’s official unemployment rate stands at 30 percent, but is more likely to be around 45 percent. In Croatia it is 12.6 percent, and in Macedonia 34.9 percent. Montenegro puts it at 11 percent, and Serbia 20 percent.

Little is being said about the former southern Serbian province Kosovo, which declared independence in February. So far, this least developed area of the Balkans has received little foreign investment. But small private business that saw some momentum over the past years are now recording decline, going by figures at the business registration office of the Ministry of Trade and Industry.

“Of the 90,000 businesses registered, around 50 percent can be considered inactive,” Mehdi Pllashniku, head of the business registration office told local media.

According to Safet Gerxhaliu from the Kosovo Chamber of Commerce, the high number of inactive businesses is worrying. “This clearly illustrates that business in Kosovo is in crisis,” he told local media.

In neighbouring Albania, the situation seems to be much as in other areas of the Balkans. Albanian Prime Minister Sali Berisha said at a business roundtable recently that the economy would be affected by the global downturn.

“Albania is not directly affected by the crisis, but will see a slowdown in emigrant remittances, which account for almost a billion euros (1.47 billion dollars) every year,” Berisha said.

More than 700,000 Albanians are working abroad, supporting more than two million people in their country.

“For us there is little more to do than to continue our work that improves the environment for investments, despite what happens in the international markets,” Berisha said.

Serbian President Boris Tadic told reporters last week that Serbian authorities will “do whatever is necessary to maintain jobs for the employed.”

Croatian Prime Minister Ivo Sanader called for a “tightening of belts” to survive the crisis. But he brushed off predictions that 150,000 people might be left jobless in near future.

Republish | | Print |

Related Tags