While Albania and the Former Yugoslav Republic (FYR) of Macedonia grew faster in 2014 than in 2013, growth in both Kosovo and Montenegro was lower than expected – though still positive. Furthermore, stagnation in Bosnia and Herzegovina and negative growth in Serbia – the biggest economy in the region – combined to restrict regional growth. Persistently high unemployment, low labor force participation rates, and sluggish formal job creation all stymied growth in 2014. A large and inefficient public sector continues to affect growth in the region and while some progress has been made in easing the burdens of the investment climate, there is still much room for improvement.
While many structural challenges like these continue to represent hurdles to sustained growth in the region, another, less predictable challenge also emerged during 2014 – significantly hampering growth in these countries and across the region as a whole: weather.
Extreme weather events, including devastating floods in May, plagued much of the region throughout 2014 and negatively impacted nearly every economic sector in the region – from agriculture, to energy, to tourism.
Unprecedented rainfall in May resulted in the worst floods the region has seen in more than 100 years. In Bosnia and Herzegovina, these floods killed more than 20 people and displaced a further 90,000 and resulted in billions of dollars in damages across the region. The floods are estimated to have cost the country some 15% of overall GDP in lost output and damages. In Serbia, the overall damage from these floods is estimated at around 4.7%. Nearly every segment of the economy was negatively impacted by these floods.
The impacts of this flood were amplified by earlier weather events in the region, further exacerbating the negative effect they had on growth in 2014. A drought in the summer of 2012 and a severe winter that same year stymied the agriculture sector, reduced energy generation, hindered tourism, and slowed construction more than usual around the region.
(Source: reliefweb)
