Balkan Economies Confront Global Crisis

By Linda Karadaku and Ivana Jovanovic

Belgrade resident Jelena Stankovic, 33, works in an international creative marketing agency, surviving cut after cut in both staffing and salary. Though still employed, she tells SETimes she needs a new job as soon as possible “because my salary is becoming smaller and smaller from day to day and prices are bigger and bigger from hour to hour”.

It’s a common thread among many of the world’s economies — concern over the impact of the global financial crisis. In the Balkans it is no less true.

In Kosovo, for example, the crisis could lead to higher prices. “[Since] Kosovo is still a country that mainly imports and depends on imports, we would have an increase of inflation, which would have an impact on family budgets and in the development of businesses,” Flamur Keqa, director of the Trade Department in the Ministry of Trade and Industry, tells SETimes.

The good news is that Kosovo is not deeply rooted in the world financial markets, so the crisis — in one sense — has limited consequences, for now at least. “For the moment, the economic and financial crisis does not reflect any important impact in the economy of Kosovo. But, if the recession continues and the economic crisis continues to show up in the developed countries, as is being foreseen, then the consequences [for Kosovo] could be reflected in the reduction of remittances, which represent an important component [influencing] economic progress,” Keqa notes.

Ibrahim Rexhepi, an economic columnist/analyst for the Kosovo daily Express, explains another potential problem. He says that commercial banks function in a closed system, with capital ensured within Kosovo. Yet any turmoil in their “parent banks” in Austria, Germany or Slovenia, would reflect domestically. Three banks with foreign capital control 90% of the banking market in Kosovo.

“They will follow a more conservative policy when giving loans. They will strengthen the criteria, and lower rates [are out of the question]. Such a policy directly attacks economic development and the social wellbeing in Kosovo,” Rexhepi tells SETimes.

Another issue, he says, involves Kosovo’s money abroad, as investments or money deposited in foreign banks. There are an estimated 1.3 billion euros — budget surplus, privatisation money and money in the Pensions Trust — directly impacted by the crisis.

“It could be seen two years ago when the Trust (of Pensions) lost about 80m euros due to the decline in the value of shares in which it had invested,” Rexhepi says. Reduction of remittances and direct foreign investments would be part of the consequences.

Albania could face a more difficult situation, sandwiched as it is between Greece and Italy, with a large number of emigrants in both countries.

Artan Hoxha, president of the Tirana Business University, says Albania’s economy began feeling the effects of the crisis in fall 2008. “The first sign was partial savings withdrawal, luckily at a low scale, without signs of panic, but no less important,” Hoxha tells SETimes, adding that banks took a conservative position in terms of loans. There were also reductions of exports, and later, reductions of imports. It was accompanied by lower remittances, and the national currency, the Lek, lost value to the euro.

However, the early consequences were recouped. Hoxha says Albania did not experience a substantial reduction of private investments — domestic or foreign — although the state’s investment power declined. Late in 2009, “the reviving of exports started,” Hoxha tells SETimes, followed by the return of money that had been withdrawn from banks.

“If it had [ended] at that point, we could have been talking about optimistic scenarios for Albania’s economic growth. Unfortunately, it did not happen like that. Since spring 2010, Greece’s issue [flared]. And then, Italy, Spain, Portugal,” Hoxha says.

He says that the crisis’s second wave, centred around Greece but involving Italy as well, “will continue to impact Albania’s economy”, especially in terms of remittances. He says émigrés will begin returning home, and that consumers and businesses alike, feeling insecure, will invest less.

“What is important to mention is that Albania’s economy does not have deep, internal problems. And secondly, in any case, it has not seen catastrophic scenarios, but only difficulties which will last for some time more.”

Edmond Arizaj, an adviser in the Albanian Ministry of Economy, Trade and Energy, credits a series of measures that he describes as “some of the main reasons the economy was not hurt”.

These include “a careful economic and monetary policy” and,” taking care of important assets and the privatisation of some public properties”, he tells SETimes.

Further north, Serbia faces a different set of circumstances. Biljana Stepanovic, the owner of Business Info Group and an economic analyst, says Serbia’s economy has been destroyed by sanctions, wars, mismanagement and unprecedented hyperinflation.

“Now nearly ten years after the fall of Milosevic, [time] has not been used to strengthen the Serbian economy. [The effects of] badly conducted privatisation can now be seen and felt; the country wasn’t opened, it did not abolish monopolies, it did not increase exports, competitiveness, efficiency. So, all in all, Serbia met the world crisis [being] vulnerable,” Stepanovic told SETimes.

One exception, she stresses, is the banking system, which withstood the first wave of the crisis. But in terms of spending, “The government has been, in accordance with its abilities, giving subsidies to the economy, helping production from the budget, providing subsidised loans for both businesses and for citizens, but now there is no money, not anymore.”

As Stankovic, the job holder-turned-seeker, sees it, “The problem is the number of unemployed people with high education levels and great experience and expertise. We are all competitors to each other; it is really sad.”