Western Balkan countries could achieve GDP growth of up to 4% this year, but they are threatened by rising energy prices, inflation and the unpredictable course of the war in Ukraine, the World Bank (WB) says in its regular autumn six-monthly report, published in Sarajevo on Monday.

It is estimated that this year Bosnia and Herzegovina (BiH), Serbia, Montenegro, Kosovo, North Macedonia and Albania will record average GDP growth of 3.4%, which is half of that in 2021 when GDP growth was 7.6%. At the same time, it is significantly higher than the forecast for 2023, when growth is expected to slow down to about 2.8% for the entire region.

This year, the highest GDP growth rate was recorded by Montenegro, of 6.9%, while North Macedonia recorded the lowest growth rate of 2.1%.

The dramatic increase in inflation was also felt in this part of Europe, reaching an average of 12% by October. Inflation in Bosnia and Herzegovina was as high as 16%.

Governments in the Western Balkans are implementing necessary measures in response to rising inflation and the energy crisis, but their cost is high as there is a significant increase in public expenditures, said World Bank Director for the Western Balkans Xiaoqing Yu. She emphasised that it is of key importance that the measures being taken protect the most vulnerable households and companies, and the World Bank remains ready to assist in these efforts.

In countries like BiH the most severe domestic risks to financial stability remain unresolved political problems, the absence of reforms required by the European Union, and the impact of rising energy prices, which will mean pressure on the fiscal sector.

In addition, disruptions in production and trade as a result of global trends and the war in Ukraine pose an additional threat.