* W.Bank warns of "formidable risks" in 2013
* Sees average GDP contraction of 0.6 pct in 2012
* Return to growth in '13 slower than first hoped
By Maja Zuvela
SARAJEVO, Dec 18 The economies of the Western
Balkans will shrink an average of 0.6 percent this year, the
World Bank said on Tuesday, slashing its 2013 forecast and
warning of "formidable risks" to growth.
The bank had previously seen average growth for the region -
comprising Albania, Bosnia, Serbia, Macedonia, Montenegro and
Kosovo - at 1.1 percent, but said the fallout from the euro zone
debt crisis was worse than previously feared.
It said a return to growth in 2013 would be more gradual
than previously thought, forecasting an expansion of 1.6 percent
rather than 2.6 percent.
Zeljko Bogetic, the World Bank's leading economist and
coordinator for the economic policy of the Western Balkans, said
the bank had hoped a downturn in 2009 would be a "short-term
aberration", but said the outlook was once again bleak.
"After recession in 2009 and two years of very sluggish
growth the Western Balkans is back in recession, led primarily
by a significant downturn in Serbia," he said, presenting the
bank's regular economic report for the region.
He said gross domestic product (GDP) in Serbia, the region's
biggest economy, would probably contract by 2 percent. The
country is struggling to stimulate growth while cutting back on
He said output in Bosnia, Montenegro and Macedonia would be
flat at best, and only Kosovo and Albania were likely to see
growth this year.
"Obviously, the exterior environment is uncertain and exerts
a negative influence on the economic performance of the region,"
Bogetic said. The 17-nation euro zone is the Balkan region's
main trade partner and source of investment.
The report said the region was proving highly vulnerable to
external risks via trade, remittances, foreign direct investment
and external financing channels, while current account deficits
"Countries had to borrow to stay within fiscal frameworks
and meet their revised 2012 deficit targets, and public debt
still remains very high," Bogetic said.
He said Serbia, Albania and Montenegro, in particular, would
have to persevere in cutting their deficits and bringing down
public debt, while also improving the investment climate and
reforming labor markets and the public sector in order to
On a positive note, Bogetic said the banking sector in the
region had shown resilience. "We have not seen major meltdowns,"
he said, but warned of the high level of non-performing loans.