Western Balkans Regular Economic Report

As elsewhere in the world, in the Western Balkans the COVID-19 pandemic has plunged countries into deep recession. While the outlook remains uncertain, economic activity in the region is now projected to contract by an estimated 4.8 percent in 2020—1.7 percentage points below the forecast in the Spring 2020 Regular Economic Report (RER). The primary causes are the drop in both domestic and foreign demand and disruptions in supply chains, especially early in the year when throughout the world countries imposed severe containment measures, such as lockdowns. A second and much stronger wave of the pandemic in the Western Balkans since mid-June and political uncertainty about elections in some countries have further impeded economic recovery. Due to travel restrictions and social distancing requirements, the summer tourism season has essentially been lost, which has hit Albania, Kosovo, and Montenegro particularly hard.

Because of the recession, labor market conditions have taken a turn for the worse and welfare improvements have been interrupted, although government response measures cushioned the blow. Before COVID-19 broke out in early 2020, most of the countries in the Western Balkans had made notable progress in reducing poverty and boosting household incomes. The crisis interrupted, and in some cases reversed, this process. By June, the unemployment rate in the region had risen by 0.5 pp, 139,000 jobs had been lost, and employers struggling with the challenges the pandemic presented have reduced employee work hours.

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Institut Manifest
Institut Manifest