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Nov 08, 2007 18:23 EEST
SARAJEVO (Bosnia and Herzegovina), November 8 (SeeNews) – Economic growth in Southeast Europe (SEE) is expected to slow to 6.1% this year and remain at about the same level next year, the European Bank for Reconstruction and Development (EBRD) said on Thursday.
The economy of the region grew by 6.4% last year.
The pace of reform in the transition region where the bank operates was fastest in SEE last year, with most advances in the Western Balkans, the EBRD said in its Transition Report 2007, covering 29 countries in Europe and Asia.
“The outlook for this [SEE] region remains favourable in the medium term […] FDI is likely to remain high due to competitive wage levels and an improving economic and institutional framework. EU accession prospects for some countries have also buoyed investor sentiment,” the EBRD said.
The report said risks in SEE countries were connected with high current account deficits and concerns over competitiveness (especially in Montenegro and Romania), risks to inflation stemming from rapidly rising wages (in particular in Romania and Serbia) as well as fiscal loosening and rising food prices.
Several countries, especially Romania and Serbia, were combining lax fiscal and income policies. Bulgaria’s external and domestic imbalances were continuing to grow despite the adoption of ‘firm policy measures’.
“The continued political stability along with further improvements to the business environment is crucial to make SEE attractive to investors,” the report said
However, all countries still faced challenges in areas such as governance and enterprise restructuring, competition policy and especially infrastructure.
The report said reforms in the Western Balkans have been encouraged by proximity to European markets. Montenegro has demonstrated its commitment to a liberal trade regime and has signed a Stabilisation and Association Agreement with the EU, the first step to eventual membership in the bloc. In Bosnia and Herzegovina, progress was shown by the privatisation of several large assets in one of its two autonomous regions, the Serb Republic.
Progress has been made in the legal framework and enforcement of competition policy in Macedonia. Other positive developments include the enhanced activity of the Serbian competition authority and better telecoms regulations in Albania, coupled with the privatisation of the Albanian telecoms company.
“Looking forward, as labour costs are increasing in […] SEE, investments to upgrade technology and enhance productivity and quality are key in the face of growing competition from China,” the report said.
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