Western Balkans Regular Economic Report, No.22, Fall 2022 : Beyond the Crises

The economies of the Western Balkans continue to face a turbulent external environment, placing households, firms, and governments under acute stress. Just as the post-COVID recovery of 2021 began to fade and the region returned to a normalized rate of economic growth, the Western Balkan region now faces a new combination of challenges. The war in Ukraine, and the resultant sharp increase and energy prices and slowdown in global growth, is weighing on economic performance in all six economies. Higher energy and food prices have pushed inflation to levels unseen for many years, eroding purchasing power and business confidence. Monetary tightening in advanced economies is pushing up financing costs and weakening external demand. Following a strong rebound in 2021, growth, although still robust, was on a decelerating path in the first half of 2022. In Q1 of 2022, the Western Balkan economies remained resilient overall, supported by sizable policy actions at the EU, euro area, and national levels. First-quarter growth was particularly strong in tourism-based economies and in Serbia. However, growth decelerated in Q2, as countries had to deal with the direct consequences of the war and is projected to continue decelerating in the second half of the year reflecting higher base levels of growth in Q3 and Q4 2021 and the stronger global headwinds