The World Bank expects the economic growth in North Macedonia to rebound to 4.6 percent in 2021, returning to the pre-pandemic output level by year end and inflation rate to reach 2.4 percent, it said on Thursday.
Despite the economic recovery, there are still risks, primarily due to the slow pace of vaccination in the country, the World Bank said in a press release, following the presentation of its latest Western Balkans Regular Economic Report, fall 2021, Greening the Recovery.
“For North Macedonia, this translates into a growth projection of 4.6 percent for 2021, much higher than the forecast in spring. This positive outlook is still surrounded by downside risks, with the pace of immunization low and supply chains still disrupted, while financial conditions have started tightening,” said Massimiliano Paolucci, World Bank Country Manager for North Macedonia and Kosovo.
“The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021. The outlook for the region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023. The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level,” the report reads.
“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Regional Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries,” it added.
The region wide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports. The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition. Global strides toward climate action are causing fundamental changes in society.
Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes.
As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments. The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.
According to the Sanja Madzarevic Sujster, senior economist at the World Bank, who presented the report, the region wide recovery is due to strength in both domestic and external demand.
“However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects,” the World Bank report said.
Regular Economic Report (RER) covers economic developments, prospects, and economic policies in the Western Balkans region: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.