A report "Western Balkan Integration and the EU: an Agenda for Trade and Growth" has been recently published by the World Bank. According to the report, the Western Balkans region is a key part of Eastern Europe, and comprises a group of diverse countries at different stages of accession to the EU. Croatia and fYR Macedonia are candidate countries for EU accession, with Croatia already in accession negotiations. Albania, Montenegro, and Serbia have signed Stabilization and Association Agreements (SAAs), an important step in the accession process. Bosnia and Herzegovina has initialled a draft SAA with the European Commission and is scheduled to sign it in mid-June. The last decade, especially the last five years, was relatively good for these countries, according to the study. However, the Western Balkan countries now need to improve and then sustain growth performance to accelerate poverty reduction and convergence with the EU, even as the external environment becomes more challenging.  The report analyzes possible binding constraints if growth were to accelerate and be led by the private sector to a much greater extent than is currently the case in the region.  

Given the small size of Western Balkan countries, the report emphasizes the critical importance of exports for growth, and in turn, the importance of foreign direct investment for exports, and suggests some priorities for action along these lines. The report:

• points to the need for deeper integration between the Western Balkan countries to make markets more competitive, and improve quality and reduce cost of services. This would also help overcome some of the disadvantages of small size and attract more foreign investment, and also help deepen integration with the EU. 
• calls for developing human capital as a centerpiece of country strategies in the region in order to improve productivity and help overcome the predominance of the low skill content in exports, and to attract foreign direct investment.
• indicates a need to reduce telecommunication costs, which would improve competitiveness, offset disadvantages associated with small individual markets, and facilitate regional integration.
• calls for action to avoid possible energy shortages that can negatively affect the pattern and volume of domestic and foreign investments.
  

The goal  of the report  is to contribute to a better understanding of the underlying dynamics of the economies of the Western Balkans, and provide the analytical foundations for policy actions needed to foster eventual integration of these countries into the European Union.

To get more information and to access full report please go to:  www.worldbank.org.mk