The World Bank projects a rise of Macedonia's economy by three percent in 2011 and 2.5 percent in 2012. These projections are part of the South East Europe Regular Economic Report, released on Tuesday, which foresees a sluggish growth for regional economies.
"Macedonia's growth several years prior to the crisis and afterwards is larger than the regional average. Projections range around three percent for this year and 2.5 percent for 2012, which is still higher than the Western Balkan average", said World Bank director for Macedonia, Lilia Burunciuc after the video-conference link presenting the World Bank report.
According to her, the Report sends a clear message that Western Balkan countries should be prepared for the current crisis and the one coming in the European Union.
"With regards to the Report, it seems that Macedonia is in a much better position compared to its neighbors. This comes as a result of the solid macroeconomic policy in the past decade and is related to the low vulnerability from the point of view of its fiscal deficit, public debt financing and stability of the banking sector", said Burunciuc.
However, she added, Macedonia's economy is one of the most open ones and its degree of integration with the rest of the globe is quite large, meaning that whatever happens in the world will have an effect on Macedonia.
According to Burunciuc, the country should continue to implement sound macroeconomic policies and policies leading to fiscal stability.
"Furthermore, attention should be given to increase of the economy's competitiveness by investing in productive infrastructure, skills and general improvement of the economy's productivity", she said.
Burunciuc stressed the poorest population would be most vulnerable, along with the real sector.
"In order to protect the poor from the crisis, the Government needs to improve the effectiveness of its system", she added.
Asked if the World Bank guarantee for the latest Citibank/Deutsche Bank loan includes recommendations for spending of the funds with regards to the most vulnerable categories, Burunciuc emphasized the program encompassed with the policy based guarantee focuses on the most essential issues towards improvement of the country's resilience when coping with effects of the financial crisis.
The South East Europe Regular Economic Report reads that the effects of a further global slowdown and the prolonged uncertainties around the eurozone crisis will influence SEE economies through trade, foreign direct investment (FDI), foreign banks, and remittances.
Trade with the EU is a key driver of exports and overall economic growth for SEE countries, amounting to between 30 percent and almost half of their GDP. Beyond trade, EU investors are also the largest aggregate provider of FDI to the region, with net inflows worth over 2 percent of the Western Balkans GDP. The presence of foreign banks creates another channel of potential influence. The share of foreign banks in the total assets of the region's banking system stands at around 89 percent.
"Whereas overall banking systems in SEE6 countries appear resilient, with high liquidity and significant capital buffers, existing credit and funding risks are being magnified in the region, driven primarily by adverse developments in the EU, an overhang of non-performing loans from banks in many SEE6 countries, and slowing economic growth," said Ron Hood, Lead Economist in the World Bank's Poverty Reduction and Economic Management Sector Unit in the Europe and Central Asia region and lead author of the report.
According to him, financing is likely to be a constraint going forward.
"External debt has grown and a decline in SEE6 growth may cut government revenues, raising pressures on public finance," underlines Hood.
