1. Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at The Balkans: Problems and Prospects Vladimir Gligorov Sarajevo, 24-25 February

2. Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at Contents Growth and external imbalances Effects of crisis Growth prospects Regional and EU integration

3. wiiw 3 GDP per capita, 2008 EUR at PPPs Source: wiiw Annual Database incorporating national statistics.

4. wiiw 4 Real GDP growth in CEE and SEE, 2000 = 100 Note: * PCC-4:AL,BA,ME,RS. **CC-2: HR, MK. Source: wiiw Annual Database incorporating national statistics.

5. wiiw 5 FDI stock, per capita, in NMS and SEEC, 2000-2008, EUR Source: wiiw Annual Database incorporating national statistics.

6. wiiw 6 Industrial production, 2008 Note: Until 1998 data refer to Serbia and Montenegro. Source: wiiw Annual Database incorporating national statistics.

7. wiiw 7 Exports of goods and services (BOP) in % of GDP Source: wiiw Annual Database incorporating national statistics.

8. wiiw 8 Unemployment rates, 2007-2009 in %, annual average, LFS Source: wiiw Database.

9. wiiw 9 The main problem Weak tradeable sector External imbalances Low domestic savings

10. wiiw 10 GDP growth rates, 2005-2010 year-on-year, growth in % Source: wiiw Annual Database incorporating national statistics.

11. wiiw 11 Industrial production growth, 2005-2010 year-on-year, growth in % Source: wiiw Annual Database incorporating national statistics.

12. wiiw 12 201120102009 1-2Q 2008 1-2Q 20082007 2 2 1 5 1.0-3.5-4.17.65.46.9Serbia -5.0-3.5.8.110.7Montenegro -3.0..5.46.0Bosnia & H. 3.01.55.46.78.06.2Albania 2 2 0-2.0-1.26.24.95.9Macedonia 0.0-5.5-6.53.92.45.5Croatia wiiw forecasts 3 2.6 -6.0-3.57.06.06.2Bulgaria 0.3-5.1-5.63.92.75.3NMS-4 20.5-8.5-6.28.26.26.3Romania GDP developments - change in % against preceding year

13. wiiw 13 Industrial production: very slow recovery Industrial production, July 2008 = 100 Source: wiiw Database. * not seasonally adjusted.

14. wiiw 14 Foreign trade: very weak recovery EUR million, 2008-2009 Imports DeficitExports Source: wiiw Database, Eurostat.

15. wiiw 15 Foreign trade: exports flat Source: wiiw Database, Eurostat. EUR million, 2008-2009 Imports DeficitExports

16. wiiw 16 Exchange rates* Flexible exchange rate: drastic real depreciation after September 2008 2008-2009, EUR NCU, Jan. 2008 = 100 *Values over 100 indicate appreciation over January 2008. Source: wiiw Database, Eurostat.

17. wiiw 17 Exchange rates* De-facto fixed exchange rate: modest real depreciation after September 2008 2008-2009, EUR NCU, Jan. 2008 = 100 Source: wiiw Database, Eurostat. *Values over 100 indicate appreciation over January 2008.

18. wiiw 18 Exchange rates* Currency board or euro as legal tender: minor real depreciation after September 2008 2008-2009, EUR NCU, Jan. 2008 = 100 Source: wiiw Database, Eurostat. Values over 100 indicate appreciation over January 2008.

19. wiiw 19 Consumer prices, 2008-2009 August 2008 = 100 Source: wiiw Database, Eurostat.

20. wiiw 20 Integration Regional cooperation – trade and investment – Resenstein-Rodan big push policies – wider region European Union perspective – key for stability and also regional cooperation

21. wiiw 21 Conclusions There are no quick fixes Growth model has to be reconsidered due to sustainability and feasibility issues Savings will have to be increased and consumption will have to grow slowly if at all in the medium term Economic policies will have to be changed and structural reforms wil be necessary with the aim to change the real exchange rate