May 6 (SeeNews) - The IMF said on Friday it sees GDP growth in the EU member states in Southeast Europe (SEE) at 3.5% in 2016 and 3.1% in 2017, while the economies of the non-EU member states in the region are expected to expand by 2.7% in 2016, 3% in 2017.
"For most SEE countries, growth is projected to be broadly unchanged or to strengthen," IMF said a report entitled, "Central, Eastern, and Southeastern Europe: How to Get Back on the Fast Track."
In much of the region, growth has been driven by domestic consumption, which in turn is backed by supportive macroeconomic policies, improving financial intermediation and rising real wages, the report said. In the near-term, strong domestic demand is expected to continue supporting growth amid continued low or negative inflation, it added.
In Romania, a cyclical upswing is underway and growth is projected to strengthen supported by wage increase, low fuel prices and VAT reduction.
In Serbia, growth is expected to accelerate as the pace of fiscal policy tightening slows and structural reforms start to take effect under the IMF-supported programme.
The strongest break for the region's economic development would be a stagnation in the euro zone, the largest trading partner for many of the countries in the region, IMF cautioned warned. Growth prospects would also be dampened by lower-than-expected growth in the U.S. and China, tighter financial conditions around the world and political instability throughout the region, in Macedonia, Moldova and Kosovo in particular.
"With the global economy less supportive in the medium term, lower growth can turn out to be the new normal in the region. This means that the pace of convergence to the living standards of advanced Europe may fall short of earlier aspirations," the IMF noted.
Supportive monetary policy combined with medium-term fiscal consolidation remains a valid policy advice for many economies in the region, the fund said. It also recommended to the countries in the region to focus on institutional reforms that improve labour supply, boost investment, raise productivity and increase returns on private investment and savings.