EU candidate countries’ & potential candidates’ economic quarterly (CCEQ). 1st quarter 2018.
Date: 2018-06-12
Institutions: Directorate-General for Economic and Financial Affairs
Subjects: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, Türkiye, construction policy, economic growth, gross domestic product, industrial production, labour market, macroeconomics, tourism

ISSN 2443-8049 (online)

EU Candidate Countries’ 
& Potential Candidates’ 
Economic Quarterly (CCEQ)

1st Quarter 2018

TECHNICAL PAPER 024 | APRIL 2018

EUROPEAN ECONOMY

EUROPEAN 
ECONOMY

Economic and 
Financial Affairs

European  Economy  Technical  Papers  are  reports  and  data  compiled  by  the  staff  of  the  European 
Commission’s Directorate-General for Economic and Financial Affairs. 

Authorised for publication by Uwe Stamm, Head of Unit D1, Candidate and Pre-Candidate Countries. 

The Report is released every quarter of the year. 

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European Commission 
Directorate-General for Economic and Financial Affairs 

EU Candidate Countries’ & Potential Candidates’ 
Economic Quarterly (CCEQ) 
1st Quarter 2018 

This  document  is  written  by  the  staff  of  the  Directorate-General  for  Economic  and  Financial  Affairs, 
Directorate  D  for  International  Economic  and  Financial  Relations  and  Global  Governance,  Unit  D1  – 
Candidate and Pre-Candidate Countries.  

Contact: Uwe.Stamm@ec.europa.eu. 

EUROPEAN ECONOMY                                                                                        Technical Paper 024 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents 

OVERVIEW .................................................................................................. 5 

ALBANIA ...................................................................................................... 9 

THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA ............. 13 

MONTENEGRO ......................................................................................... 17 

SERBIA ....................................................................................................... 21 

TURKEY ..................................................................................................... 25 

BOSNIA AND HERZEGOVINA .............................................................. 29 

KOSOVO* ................................................................................................... 33 

*  This  designation  is  without  prejudice  to  positions  on  status,  and  is  in  line 
with  UNSCR  1244/1999  and  the  ICJ  Opinion  on  the  Kosovo  declaration  of 
independence.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OVERVIEW 

The  economic  recovery  in  the  Western  Balkans  continued  in  2017  but  real  growth  slowed 
from  3.1% in  2016 to  2.1% in  2017,  mainly owing to  weather-related  supply-side shocks in 
Serbia, the largest economy in the region, as well as a prolonged political crisis in the former 
Yugoslav Republic of Macedonia.  Private consumption and investment continued to support 
growth  while  exports  seem  to  have  gained  some  momentum.  Current  account  deficits 
narrowed  in  some  countries,  but  overall  external  positions  in  many  economies  remain 
vulnerable. Economic expansion led to further job creation and unemployment rates dropped, 
but  remain  high  across  the  Western  Balkans.  With  the  exception  of  Montenegro,  fiscal 
balances in the region remained in line with targets or even over-performed. However, high 
public  debt  levels  and/or  lack  of  fiscal  buffers  remain  a  source  of  vulnerability  in  most 
countries. In Turkey, annual GDP expanded by 7.4% following various government stimulus 
measures,  but  macroeconomic  imbalances  such  as  high  inflation  and  a  rapidly  widening 
current account persist. 

in 

the 

largely  due 

In 2017, GDP growth in the Western Balkans 
slowed  to  2.1%,  down  from  3.1%  in  2016 
(Chart  1), 
to  bad  weather 
conditions  in  Serbia,  the  largest  economy, 
where  growth  fell  from  2.8%  to  1.9%,  and  a 
prolonged  political  crisis 
former 
Yugoslav  Republic  of  Macedonia  where 
economic  activity  stagnated.    Also  Kosovo  as 
well  as  Bosnia  and  Herzegovina  recorded 
somewhat  lower  GDP  growth.  In  the  case  of 
Kosovo,  the  slowdown  was  largely  due  to 
weaker  domestic  consumption,  affected  by 
prolonged 
uncertainty,  while 
investment  and  net  exports  remained  strong. 
Bosnia's  economic  performance  continued  to 
suffer  from  weak  investments.    Conversely, 
annual  GDP  growth  accelerated  in  Albania  to 
3.8%  (the  highest  annual  growth  rate  since 
2008)  up  from  3.4%  in  2016,  boosted  mainly 
by  private  consumption  as  well  as 
in 
Montenegro  (to  4.4%  from  2.9%)  due  to  a 
surge in fixed capital formation.  

political 

In  Turkey,  GDP  growth  accelerated  sharply 
during  2017,  to  7.4%  compared  to  3.2%  in 
2016,  mainly  driven  by  a  strong  rebound  of 
private  consumption  as  well  as 
strong 
investment  supported  by  the  state-guaranteed 
corporate loan scheme. 

Source: Macrobond, Commission calculations 

*** 

the 

in  2017  compared 

remains  challenging.  Despite 

The  labour  market  situation  in  the  Western 
Balkans 
the 
ongoing  economic  recovery  the  pace  of  job 
creation  slowed  down  in  most  countries  of  the 
last  year. 
region 
to 
Employment  growth  decelerated 
in  Serbia, 
former  Yugoslav  Republic  of 
Albania, 
Macedonia  and  Kosovo  while  it  accelerated  in 
Montenegro  contributing 
job 
growth  rate  in  the  Western  Balkans  of  2.9%  in 
2017  down  from  3.9%  in  2016  (Chart  2). 
Growing employment levels contributed to a drop 
in  unemployment  rates  in  most  countries  in  the 
region  in  2017.  The  decline  was  particularly 
significant  (at 
in  Bosnia  and 
least  2  pps) 
Herzegovina.  

to  an  average 

5 

-3.0-2.0-1.00.01.02.03.04.05.06.0-6.0-4.0-2.00.02.04.06.08.010.012.02008200920102011201220132014201520162017Chart 1: Real GDP growth, % y-o-yWestern Balkans (rhs)Turkey (lhs) 
 
 
the 

in  2017, 

labour  market 
In  Turkey, 
improved in line with a growing economy with 
employment  growth  accelerating  to  3.5%  up 
from  2.2%  in  2016,  while  the  unemployment 
rate remained unchanged at 11.1%.  

Source: Macrobond, Commission calculations 

*** 

As  a  result  of  narrow  production  bases  and 
competitiveness challenges, merchandise trade 
deficits  remain  very  high  across  the  Western 
Balkans, ranging from 12% of GDP for Serbia 
to  18%  or  above  for  Albania  and  Bosnia  and 
Herzegovina  and  equal  to  42%  or  above  for 
Kosovo  and  Montenegro.  Trade  deficits  are 
only  partially  offset  by  surpluses  in  the 
services  account  and  in  current  transfers, 
resulting  in  large  foreign  financing  needs.  
External  account  developments  in  the  region 
during  2017  point  to  a  rather  diverse  picture. 
Compared  to  the  year  before,  annual  current 
account  deficits  widened 
in  Serbia  and 
Montenegro  whereas  they  narrowed  in  the 
former  Yugoslav  Republic  of  Macedonia, 
Albania 
In  Bosnia  and 
Herzegovina  the  current  account  deficit  stood 
at  the  same  level  as  in  2016.  Overall,  the 
regional current account deficit stood at around 
6% of GDP in 2017 (Chart 3), compared to 5% 
a year before.  

and  Kosovo. 

In  Turkey,  the  12-month  cumulative  current 
account  deficit  expanded  to  5.5%  of  GDP  in 
2017  from  3.8%  in  2016,  largely  due  to  a 
strong increase in the trade deficit in goods. As 
opposed  to  the  Western  Balkan  countries,  the 

financing of the current account deficit in Turkey 
continues to rely mainly on more volatile forms of 
capital flows. 

urce: Macrobond, Commission calculations 

So

*** 

inflation 

annual  CPI 

In 2017, consumer price inflation in the Western 
Balkan  countries  accelerated,  though  modestly, 
as  stronger  domestic  demand  and  higher  energy 
and  food  prices  generated  upward  pressures.  In 
Montenegro and the former Yugoslav Republic of 
Macedonia 
further 
accelerated  to  3.7%  and  1.9%,  respectively,  in 
February  whereas  in  Kosovo  the  headline  price 
level  remained  unchanged.  In  Albania,  annual 
CPI  inflation  stood  at  2%  in  March  (still  below 
the  central  bank’s  3%  target)  while  in  Serbia,  it 
slowed to 1.4% falling below the target tolerance 
band  of  3%±1.5pps.  The  central  bank  of  Serbia 
reacted  by  lowering  its  key  policy  rate  with  two 
successive cuts of 25 bps each in March and April 
from  3.50%  to  3.00%.  It  also  narrowed  in  April 
the  interest  rate  corridor  from  ±1.5  to  ±1.25pps. 
The  Bank  of  Albania  has  kept its  key  policy  rate 
at  the  historic  low  of  1.25%  since  May  2016 
while  the  central  bank  of  the  former  Yugoslav 
Republic of Macedonia has kept the coupon on its 
bills, which serves as its benchmark interest rate, 
unchanged since February 2017, at 3.25%. 

inflation 

In  Turkey,  annual  CPI 
increased 
markedly to 11.1% in 2017 up from 7.8% in 2016 
as 
jumped, 
moving  further  away  from  the  central  bank's 
official 5% target (+/- 2pps band width).  

lira-denominated 

import  prices 

6 

-4.0-2.00.02.04.06.08.02008200920102011201220132014201520162017Chart 2: Employment growth, % y-o-yWestern BalkansTurkey-14.0-12.0-10.0-8.0-6.0-4.0-2.00.02011Q12011Q22011Q32011Q42012Q12012Q22012Q32012Q42013Q12013Q22013Q32013Q42014Q12014Q22014Q32014Q42015Q12015Q22015Q32015Q42016Q12016Q22016Q32016Q42017Q12017Q22017Q32017Q4Chart 3: Current account balance, % of GDP Western BalkansTurkey 
*** 

Bank  lending  continued  to  be  supportive  of 
growth in the Western Balkan region, as credit 
growth  accelerated  in  2017  in  Bosnia  and 
Herzegovina, Kosovo  and Montenegro as well 
as  in  Serbia  and  Albania  (when  adjusted  for 
exchange  rate  changes  and  loan  write  offs  in 
both  countries).  On  the  other  hand,  credit 
growth  decelerated  in  the  former  Yugoslav 
Republic of Macedonia. As a common feature, 
household  lending  has  been  growing  faster 
than  corporate  lending.  Credit  extension  is 
gradually  becoming  less  constrained  by  the 
loans,  as  most 
level  of  non-performing 
Western  Balkan  countries  managed  to  further 
reduce NPL ratios in 2017 partly as a result of 
improved 
and 
mandatory  write-offs.  At  the  end  of  the  year, 
Albania  records  the  highest  NPL  ratio  in  the 
region  (13.2 %  of  total  loans),  which  is 
significantly lower than the 18.3% recorded in 
2016  and  the  lowest  level  in  the  last  seven 
years.  In  Bosnia  and  Herzegovina  the  NPL 
ratio  stood  at  10.9%,  followed  by  Serbia 
(which  reached  its  lowest  level  in  a  decade  - 
9.9%) and Montenegro (7.3%).  

frameworks 

resolution 

Annual  credit  growth  in  Turkey  significantly 
accelerated to 21.2% in 2017 up from 16.2% in 
2016, supported by public loan guarantees and 
macro-prudential  loosening.  The  NPL  ratio 
decreased marginally to 3.1% down from 3.2% 
in  the  previous  year  as  new  loans  were added 
faster than non-performing loans to the banks' 
balance sheets. 

*** 

In 2017, fiscal balances in most of the Western 
Balkan  countries  remained  within  or  over-
performed  budget  targets.  Serbia  recorded  a 
surplus  of  1.2%  of  GDP  for  the  first  time  in 
more  than  a  decade  mainly  due  to  strong 
revenue performance, largely outperforming its 
deficit  target.  Also  fiscal  deficits  in  Albania, 
Kosovo  and  the  former  Yugoslav  Republic  of 
Macedonia  remained  within  the  limits  set  by 
In  Albania, 
their 

respective 

budgets. 

expenditures  increased  more  than  revenues  and 
the fiscal deficit rose slightly to 2.0%.of GDP. In 
the  former  Yugoslav  Republic  of  Macedonia,  the 
general  government  fiscal  deficit  remained  at 
2.7% of GDP, due to an equal moderate increase 
in  both  revenues  and  expenditure.  In  Kosovo, 
preliminary  data  show  that  the  budget  deficit 
accounted  for  0.7%  of  GDP.  These  countries 
continued 
to  experience  under-execution  of 
capital  spending,  pointing  to  persistent  problems 
in  the  planning,  selection  and  management  of 
public  investment.  In  Montenegro,  the  rise  in 
expenditure outpaced the growth of revenues due 
to  contingent  liabilities  and  a  surge  in  capital 
spending.  As  a  result,  the  central  government 
deficit  increased  to  5.4%  of  GDP  (from  3.6%  in 
2016),  1.2  pps  higher  than  the  revised  budget 
target.  Continued  fiscal  consolidation  (without, 
however,  undermining  much-needed  capital 
spending) is necessary in a number of countries to 
rebuild  fiscal  buffers  and  reduce  public  debt 
levels  which  are  especially  high  in  Albania 
(70.1%  of  GDP),  Montenegro  (65.1%  of  GDP) 
and Serbia (61.5% of GDP). 

In  Turkey, 
the  central  government  deficit 
increased to 1.5% of GDP in 2017 from 1.1% in 
2016  as  the  government  implemented  fiscal 
stimulus  in  the  aftermath  of  the  attempted  coup 
and  the  run-up  to  the  presidential  referendum. 
General government debt stood at 28.5% of GDP 
in 2017 compared to 28.3% of GDP in 2016. 

7 

 
8 

European Commission, ECFIN-D-1Candidate and potential candidate countries: Summary table2013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 18Gross domestic product (in real terms, annual % change)Albania1.01.82.23.43.83.84.23.63.4:N.A.N.A.N.A.The former Yugoslav Republic of Macedonia2.93.63.82.90.02.73.20.21.2:N.A.N.A.N.A.Montenegro3.51.83.42.94.43.03.34.74.0:N.A.N.A.N.A.Serbia2.6-1.80.82.81.93.33.52.22.5:N.A.N.A.N.A.Turkey8.55.26.13.27.44.04.111.37.3:N.A.N.A.N.A.Bosnia and Herzegovina2.60.23.83.31.6::1.83.0:N.A.N.A.N.A.Kosovo3.41.24.14.13.7::4.43.2:N.A.N.A.N.A.UnemploymentAlbania16.417.917.515.614.113.713.014.013.6:N.A.N.A.N.A.The former Yugoslav Republic of Macedonia29.028.226.324.022.421.421.022.322.1:N.A.N.A.N.A.Montenegro19.518.217.818.016.416.716.015.117.4:N.A.N.A.N.A.Serbia22.119.217.713.515.311.69.512.914.7:N.A.N.A.N.A.TurkeyN.A.10.110.511.111.111.010.710.810.5::::Bosnia and Herzegovina27.527.527.725.420.5::N.A.N.A.N.A.N.A.N.A.N.A.Kosovo30.035.332.927.5::::::N.A.N.A.N.A.Current account balance (% of GDP)**Albania-9.3-10.8-8.6-7.6-6.9-7.8-8.2-4.2-9.7:N.A.N.A.N.A.The former Yugoslav Republic of Macedonia-1.6-0.5-2.0-2.7-1.3-2.4-2.3-1.9-1.3:N.A.N.A.N.A.Montenegro-14.5-15.2-13.2-18.1-18.9-16.7-16.0-16.2-18.9:N.A.N.A.N.A.Serbia-6.1-6.0-4.7-3.1-5.7-5.7-5.8-4.6-5.7:N.A.N.A.N.A.Turkey-7.8-4.7-3.8-3.8-5.5-4.2-4.4-4.7-5.5:N.A.N.A.N.A.Bosnia and Herzegovina-5.0-7.1-5.2-4.7-4.7::-4.3-4.7:N.A.N.A.N.A.Kosovo-3.4-6.9-8.6-8.3-5.9::-6.7-6.8:N.A.N.A.N.A.Inflation (Consumer price index, annual % change)Albania1.91.61.91.32.02.42.71.71.81.91.72.12.0The former Yugoslav Republic of Macedonia2.8-0.3-0.3-0.31.42.02.41.62.2:1.11.91.6Montenegro (HICP)1.8-0.51.40.12.82.22.03.32.90.53.63.7:Serbia7.92.11.41.13.13.33.03.02.91.61.91.51.4Turkey7.58.97.77.811.18.57.410.612.310.310.310.310.2Bosnia and Herzegovina-0.1-0.9-1.0-1.11.2::1.11.3:0.30.9:Kosovo1.80.4-0.50.31.5::1.70.7:-0.20.0:General government balance (% of GDP)Albania-5.2-5.2-4.1-1.8-1.9-2.0-1.8-0.20.9::::The former Yugoslav Republic of Macedonia-3.8-4.2-3.5-2.7-2.7-3.0-3.0-1.7-3.5:N.A.N.A.N.A.Montenegro-4.6-2.9-8.3-3.6-5.4-5.6-2.70.2-3.2::::Serbia-5.5-6.6-3.7-1.31.20.00.03.3-2.4:N.A.N.A.N.A.Turkey0.10.11.3-0.9-2.4f-1.8-2.6-0.3-0.8:N.A.N.A.N.A.Bosnia and Herzegovina-2.0-2.00.61.2::::::N.A.N.A.N.A.Kosovo-3.1-2.2-2.0-1.2::::::N.A.N.A.N.A.Forecast: ECFIN forecast Autumn 2017 published November 2017** Q figures refer to a 4 quarters moving average.ECFIN 2017Autumn forecastALBANIA 

Key developments 

submitted 

The  Albanian  government 
its 
Economic  Reform  Programme  (ERP)  for  2018-
2020 to the European Commission at the end of 
January. It projects a gradual increase of annual 
GDP  growth  to  4.4 %  over  the  three  years.  On 
the  fiscal  side,  the  ERP  foresees  that  spending 
restraint  will 
the  deficit  of  general 
government  to  1.2 %  of  GDP  by  2020.  Public 
debt is expected to decline to 63.5 % of GDP by 
2020.  In  addition  to  the  macroeconomic  and 
fiscal projections, the ERP provides an overview 
of current plans for structural reforms. 

lower 

In  mid-April, 
the  European  Commission 
presented its annual enlargement package which 
included a country report on Albania. Regarding 
the  economic  criteria  for  EU  membership,  it 
stated that Albania has made some progress and 
is  moderately  prepared 
in  developing  a 
functioning  market  economy.  Albania  has  also 
made  some  progress  and  has  some  level  of 
preparation  in  terms  of  capacity  to  cope  with 
competitive  pressure  and  market  forces  within 
the EU. 

Real sector  

Real GDP expanded by 3.4 % y-o-y in the fourth 
quarter  of  2017  compared  to  3.6 %  in  the  third 
quarter.  Annual  GDP  growth  reached  3.8 %  in 
2017,  up  from  3.4 %  in  the  preceding  year  and 
the highest annual growth rate since 2008. 

had 

consumption 

(3.6 %).  This 

the  previous  quarter 

Household  spending  increased  at  a  solid  rate in 
y-o-y terms (3.1 %) albeit somewhat slower than 
is 
in 
consistent  with  employment  growth  and  the 
double-digit jump in public wages in the spring. 
Government 
expanded 
strongly  in  the  first  half  of  2017,  but  has 
subsequently  been  reined  in.  It  registered  an 
outright  decline  (-1.8 %)  in  the  fourth  quarter, 
allowing  the  government  to  meet  its  target  for 
the  fiscal  deficit.  Gross  fixed  capital  formation 
increased  moderately  (4.1 %),  similar  to  the 
increase  in  the  third  quarter  but  substantially 
below the double-digit growth in the first half of 
the  year.  The  slowdown  in  capital  spending  is 
explained  by  two  large  energy  projects  nearing 
completion. 

External 
disappointing 
showed 
performance  in  the  fourth  quarter.  The  volume 

trade 

a 

of goods exports fell by 9.0 % y-o-y, the second 
consecutive  quarterly  decline.  Exports  of 
services  were  also  relatively  weak  (-1.8 %), 
following 4 years of very strong growth. At the 
same  time,  imports  of  goods  accelerated  to 
double-digit growth (12.3 % compared to 8.6 % 
in 
the 
continuation  of  solid  household  spending. 
Imports  of  services  increased  at  a  somewhat 
slower  rate  (8.1 %,  down  from  11.1 %  in  the 
previous quarter).  Since imports  exceed exports 
by  a  large  margin,  net  exports  subtracted  from 
GDP growth for a second consecutive quarter. 

the  previous  quarter) 

reflecting 

In the first quarter of 2018, the overall economic 
confidence indicator increased by 3.7 pps to 117 
points. This reflected rising confidence in trade, 
services and industry which was partly offset by 
decreasing confidence in the construction sector 
and amongst consumers. 

Labour market 

labour  market  reflected 

The 
the  on-going 
economic  expansion.  In  the  fourth  quarter  of 
2017, employment was up by a solid 3.4 % y-o-
y  for  the  15-64  age  group.  The  unemployment 
rate  fell  by  0.9  pps  y-o-y  to  13.6 %.  It  has 
trended down for almost 4 years and is now the 
lowest  since  the  first  quarter  of  2012.  Youth 
unemployment remains very high although it has 
also been declining from its peak in 2015. In the 
fourth  quarter  of  2017,  the  unemployment  rate 
for the 15-29 age group registered 24.6 %, down 
by 3.5 pps y-o-y. The labour force increased by 
2.4 %  y-o-y  and  the  labour  force  participation 
rate  continued 
trend  upwards,  reaching 
67.4 % compared to 65.7 % in the fourth quarter 
of  2016.  The  gap  between  male  and  female 
labour  force  participation  widened  to  18  pps 
(male: 76.4 %; female: 58.4 %). 
According  to  administrative  data,  employment 
growth  in  the  non-agricultural  private  sector 
increased  18.6 %  y-o-y  in  the  fourth  quarter 
while  employment  in  the  public  sector  and  in 
1.5 %, 
agriculture 
respectively.  

declined 

0.4 % 

and 

to 

External sector  

Albania's  current  account  deficit  narrowed  for 
the  third  consecutive  year  in  2017  to  6.9 %  of 
GDP  (EUR  803  million)  from  7.6 %  in  2016. 

9 

 
 
 
 
 
 
 
 
 
 
 
 
account 

services 

(transport, 

This was the result of a sharply rising surplus in 
the 
travel, 
manufacturing  services,  and  other  services) 
which more than offset a higher deficit in goods 
trade  and  a  growing  outflow  of  income  from 
foreign  investments  in  Albania.  Net  inflows  of 
workers'  remittances  contributed  with  5.5 %  of 
GDP 
the  current  account,  offsetting  a 
significant  part  of  the  large  trade  deficit  for 
goods. 

to 

Last  year's  improvement  in  the  balance  of 
payments  was  concentrated 
the  first  3 
quarters. The fourth quarter showed a 65.8 % y-
o-y  increase  of  the  current  account  deficit  as 
imports  surged  by  11.7 %  y-o-y  while  exports 
stagnated (in nominal terms). 

in 

direct 

investments 

to  8.4 %  of  GDP 

(FDI) 
Net 
foreign 
in  2017, 
corresponded 
financing  the  current  account  deficit  by  a 
comfortable  margin.  Their  high  level  is  to  a 
large extent explained by FDI inflows related to 
two large-scale projects in the energy sector. 

At 
the  end  of  2017,  gross  external  debt 
amounted  to  67.9 %  of  GDP  (EUR  7,928 
million), down by 3.9 pps over the year. Foreign 
exchange  reserves  declined  slightly  in  the  first 
two  months  of  2018  from  EUR  2,996  million 
(25.6 %  of  GDP)  at  the  end  of  2017.  They 
correspond  to  6  ½  months  of  imports  of  goods 
and services. 

Monetary developments 

Inflation  remained  low  and  stable  in  the  first 
quarter  of  2018  helped  by  an  appreciating 
currency. Consumer prices were up by 2.0 % y-
o-y in March 2018 compared to 2.1 % one year 
earlier.  The  average  monthly  inflation  rate  was 
marginally higher in the first quarter than in the 
previous quarter. Food prices rose by 6.1 % over 
the quarter, but were only up by 3.1 % y-o-y in 
March.  Water  and  rent  prices  also  rose  above 
average. The other CPI items continued to show 
very low or no price increases in y-o-y terms.  
its 
The  Bank 
accommodative  monetary  policy  stance  by 
keeping the key policy rate (the repo rate) at the 
record  low  of  1.25  %  and  the  interest  rates  for 
the  overnight  deposit  facility  and  the  overnight 
lending  facility  at  0.25  %  and  2.25  %, 
respectively.  The  central  bank  expects 
to 
maintain  the  current  monetary  policy  stance 
until  at  least  the  fourth  quarter  of  2018.  It 
expects inflation to hover around 2.2 % in 2018 
and to return to the 3 % target in 2019. 

of  Albania  maintained 

The  Albanian  lek  appreciated  by  1.9 %  against 
the  euro  over  the  first  quarter,  continuing  the 
trend from 2017. 

Financial sector 

Lending to the private sector increased 3.2 % y-
o-y in the fourth quarter of 2017 when adjusted 
for  loan  write-offs.  This  was  slightly  below  the 
moderate  growth  pace  in  the  rest  of  the  year. 
Lending growth to households (6.9 %) continued 
to  exceed lending  growth to  businesses (1.5 %) 
by  a  wide  margin.  Subdued 
to 
businesses  continued  to  reflect  limited  demand 
and  relatively  tight  credit  standards.  Due  to  the 
high  share  of  loans  denominated  in  foreign 
currency,  the  lek's  appreciation  depresses  credit 
growth data somewhat. 

lending 

The  ratio  of  non-performing  loans  (NPLs)  to 
total loans trended downward in 2017. It stood at 
13.2 % at the end of the year, down from 18.3 % 
one year earlier and the lowest level in the last 7 
years.  In  early  2018,  however,  the  NPL  ratio 
started  rising  again,  registering  13.7 % 
in 
February. The banking sector as a whole is well 
capitalised  with  a  capital  adequacy  ratio  of 
16.6 %  at  the  end  of  2017,  up  by  0.2  pps  over 
the quarter and by 0.9 pps y-o-y.  

Fiscal developments 

under-executed 

In  2017, 
the  overall  deficit  of  general 
government  deficit  corresponded  to  2.0 %  of 
GDP, up from 1.8 % in 2016 but in line with the 
targeted  deficit  in  the  original  and  the  two 
revised budgets. Total revenues remained 2.8 % 
below target  while  the  ratio  of  revenue  to  GDP 
increased  by  0.1  pp. 
to  27.7 %.  Total 
expenditures remained 2.7 % below target while 
increasing by 0.3 pps to 29.7 % of GDP. Capital 
following 
spending  was 
significant  overspending 
the  previous  year. 
Interest  expenditures  were  also  lower  than 
expected, declining by 0.4 pps y-o-y to 2.1 % of 
GDP.  As  a  consequence,  the  primary  fiscal 
surplus declined by 0.6 pps to 0.1 % of GDP in 
2017. Public debt declined by 2.2 pps in 2017 to 
70.1 % of GDP.   
revenues 
In 
increased  by  5.5 %  y-o-y  which  was  slightly 
below  budget.  Total  expenditures  increased  by 
14.5 %  y-o-y  which  was  slightly  above  budget. 
The budget deficit in 2018 is targeted to remain 
at 2.0 % of GDP. 

January-February  2018, 

total 

10 

 
 
 
 
 
 
 
TABLE 

11 

European Commission, ECFIN-D-1ALBANIA2013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1Percent-16.6-6.9-5.5-3.71.5::2.0-0.5:N.A.N.A.N.A.Industrial production 1.2Ann. % ch20.53.4-8.9-19.48.9::5.93.0:N.A.N.A.N.A.Gross domestic product 1.3Ann. % ch1.01.82.23.43.83.84.23.63.4:N.A.N.A.N.A.Private consumption 1.4Ann. % ch1.82.81.22.72.82.73.13.63.1:N.A.N.A.N.A.Gross fixed capital formation 1.5Ann. % ch-2.0-4.53.53.37.74.46.24.74.1:N.A.N.A.N.A.Construction index 1.6Ann. % ch1.00.20.30.00.7::0.50.4:N.A.N.A.N.A.Retail sales 1.7Ann. % ch5.44.75.96.61.3::1.10.2::::2  Labour marketUnemployment 2.1% 16.417.917.515.614.113.713.014.013.6:N.A.N.A.N.A.Employment 2.2Ann. % ch-9.71.64.96.12.73.63.81.33.4:N.A.N.A.N.A.Wages 2.3Ann. % ch4.11.71.80.99.82.83.111.212.8:N.A.N.A.N.A.3  External sectorExports of goods 3.1Ann. % ch15.74.5-5.60.112.1::13.08.8:24.418.7:Imports of goods 3.2Ann. % ch-2.16.0-0.76.48.1::9.011.5:27.44.1:Trade balance* 3.3% of GDP-20.1-20.8-21.0-22.8-22.1-25.3-25.8-21.8-22.1:N.A.N.A.N.A.Exports goods and services 3.4% of GDP28.928.227.328.931.5::31.230.7:N.A.N.A.N.A.Imports goods and services 3.5% of GDP47.047.244.545.746.6::45.145.3:N.A.N.A.N.A.Current account balance* 3.6% of GDP-9.3-10.8-8.6-7.6-6.9-7.8-8.2-4.2-9.7:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP9.68.28.08.78.4::11.57.2:N.A.N.A.N.A. International reserves 3.8mio EUR1 955.72 084.82 637.72 880.32 996.0:::::::: Int. reserves / months Imp 3.9Ratio5.25.36.97.06.7::::::::4  Monetary developmentsCPI 4.1Ann. % ch1.91.61.91.32.02.42.71.71.81.91.72.12.0Producer prices 4.2Ann. % ch:::-1.52.8::2.12.3::::Food prices 4.3Ann. % ch4.22.24.33.33.9::3.83.5:2.22.73.1M2 4.4Ann. % ch5.11.13.6-0.71.5::1.01.0:-0.50.4:Exchange rate LEK/EUR 4.5Value140.26140.14139.74137.36134.14::132.88133.47132.45133.52132.72131.10Nominal eff. exchange rate 4.6Index:::::::::::::5  Financial indicatorsInterest rate (3 months) 5.1% p.a.::2.871.13:::::::::Bond yield  5.2% p.a.6.033.452.772.052.07::2.262.08:2.372.16:Stock markets 5.3Index:::::::::::::Credit growth 5.4Ann. % ch-0.20.20.3-0.7-0.1::-0.10.3:1.00.8:Deposit growth 5.5Ann. % ch3.71.51.91.11.0::0.5-0.3:-1.1-0.6:Non performing loans 5.6% total23.222.818.218.313.2::14.813.2:13.513.7:6  Fiscal developmentsGeneral government balance* 6.1% of GDP-5.2-5.2-4.1-1.8-1.9-2.0-1.8-0.2-1.9::::General government debt* 6.2% of GDP65.670.172.772.368.268.566.067.4::N.A.N.A.N.A.f: ECFIN forecast Autumn 2017 published November 2017* Q figures refer to a 4 quarters moving average.ECFIN 2017Autumn forecast 
CHARTS 

12 

European Commission, ECFIN-D-1ALBANIAJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12-3-2-1012345620142015201620172018GDP growth% year-on-year101112131415161718192020142015201620172018Unemployment% of labour -12-10-8-6-4-2020142015201620172018Current account balanceAnnual movingaverage, % of GDP0123420142015201620172018InflationCPI, % year-on-year-5.2-4.1-1.8-1.9-6-5-4-3-2-1020142015201620172018General government balance% of GDP85909510010511013013313613914214520142015201620172018Exchange rateSeries1REER2005=100 
THE  FORMER  YUGOSLAV  REPUBLIC 
OF MACEDONIA 

Key developments 

On  30  January,  the  government  submitted  its 
Economic  Reform  Programme  for  the  period 
2018-2020.  It  expects  a  gradual  acceleration  of 
annual GDP growth until 2020, averaging 3.6%. 
The  general  government  budget  deficit 
is 
projected to decline to 2.3% of GDP by 2020. 

On  11  January,  the  government  issued  its  sixth 
Eurobond in the amount of 500 mio. Euro, at an 
interest  rate  of  2.75%  and  repayable  after  7 
years.  The  proceeds  are  intended  to  cover  the 
2018 fiscal deficit as well as contribute to 2018 
and 2019 debt repayment.  

On  16  March,  Standard  and  Poor's  Global 
Ratings  affirmed  its  BB-/B  sovereign  credit 
rating  for  the  country.  Analysts  kept  a  stable 
outlook as they anticipate a pick-up in economic 
growth,  in  spite  of  lingering  political  risks  and 
unfavourable public debt developments. 

In  mid-April, 
the  European  Commission 
presented  its  annual  enlargement  package.  It 
stated  that  as  regards  the  economic  criteria  for 
EU membership, the former Yugoslav Republic 
of Macedonia has made some progress and is at 
a  good  level  of  preparation  in  developing  a 
functioning  market  economy.  The  economy  has 
also  made  some  progress  and  is  at  a  moderate 
level  of  preparation  to  cope  with  competitive 
pressures and market forces within the EU. 

Real sector  

After  three  quarters  of  virtual  stagnation,  the 
economy returned to modest growth of 1.2% y-
o-y  in  the  fourth  quarter  of  2017.  Still,  on 
average for the full year 2017, economic output 
remained  largely  at  the  same  level  as  one  year 
earlier,  as 
fourth-quarter  gains  were  not 
sufficient  to  compensate  for  the  accumulated 
output losses in the first three quarters. In 2017, 
robust growth in household spending (+2.9% y-
o-y) was more than offset by weak investment (-
4.5%)  and  public  consumption  (-1.5%).  Export 
growth accelerated compared to one year earlier 
(+1.1pp  to  9.2%),  while  import  growth  was 

weaker  (-4.3pp  to  7.3%).  Still,  net  exports  did 
not contribute to GDP growth. The recession in 
the  construction  sector  sharpened  in  the  fourth 
quarter  (-19.5%  y-o-y  compared  to  an  average 
11.7%  in  the  first  three  quarters)  bringing 
average 
to  13.7%. 
Manufacturing recovered somewhat, limiting the 
output decline for the full year to 4%.  

the  year 

losses 

for 

performance 

At  the  beginning  of  2018,  earlier  signs  of  an 
economic  recovery  were  bolstered  by  high 
frequency  indicators.  The  industrial  production 
index  continued  to  recover  in  January  and 
February  (+5.6%  y-o-y).  This  was  driven  by 
in  manufacturing 
improved 
(+10.6%).  The  increase  in  the  production  of 
capital  goods  (+22.5%)  bodes  well  for  an 
imminent  pick-up  in  investment.  Retail  sales 
also  increased,  by  5.2%  y-o-y  on  average,  in 
January  and  February.  Investor  confidence 
seems 
to  be  returning  and  export-oriented 
production  capacities  of  foreign  companies  in 
the country are expanding. 

Labour market 

The  labour  market  improved  further  between 
October and December. The unemployment rate 
dropped by 1.2pps y-o-y to 21.9%, according to 
the  Labour  Force  Survey.  The 
youth 
unemployment  rate  (15-24  years)  improved 
slightly  in  this  period  (45.7%  compared  to 
47.3%),  but 
remained  very  high.  Annual 
employment growth slowed down for the second 
quarter in a row, but remained robust (1.9% y-o-
y). The labour force increased slightly compared 
to  one  year  earlier,  on  account  of  a  rise  in  the 
number  of  older  workers  (+1.8%y-o-y  for  the 
age  group  above  50  years  old).  In  this  period, 
fewer women were active in the labour market (-
1.6%), which largely accounts for the drop in the 
female  participation  ratio  (51.4%  compared  to 
52%  one  year  earlier).  Overall  labour  market 
participation  (15-64  years)  rose  from  64.8%  in 
the last quarter of 2016 to 65.2%.  

Net  wages  increased  by  3.1%  y-o-y  in  the  last 
quarter,  in  nominal  terms.  Given  the  slightly 
tighter  price  environment  in  that  period,  this 

13 

 
 
 
 
 
 
 
 
translated  into  real  net  wage  growth  of  0.9%, 
which accelerated markedly in January, to 4.5%, 
benefitting  from  strong  nominal  wage  growth 
(+5.6%) and relenting price pressures. 

External sector  

(+9.6%),  with  robust,  double-digit  increases  in 
both  consumer  loans  and  mortgages.  Corporate 
credit  growth  accelerated  further,  compared  to 
the preceding three months, to 1.8% on average 
(+1.4pps), and picked up further in the first two 
months of 2018, to 3.2%y-o-y.  

The  current  account  deficit  narrowed  further  in 
the fourth quarter and stood at 1.3% of full-year 
GDP at year-end (-1.4pps compared to one year 
earlier). The merchandise trade balance declined 
during this period (-1.2pps to 17.9%), while the 
primary  income  deficit  widened  by  0.3pps  to  -
4,2%,  driven  by  a  further  increase  in  the 
repatriation  of  profits  by  foreign  investors. 
Current  transfers  from  abroad  increased  by 
0.4pps  to  16.8%.  Net  private  transfers  covered 
some  94%  of  the  merchandise  trade  deficit  in 
2017.  Net  FDI  inflows  amounted  to  2.3%  of 
GDP  in  2017,  and  thus  more  than  covered  the 
current  account  deficit.  Gross  external  debt, 
excluding  central  bank  transactions,  stood  at 
73.6% of GDP at the end of the year, or 0.7pps 
lower  than  one  year  earlier.  An  increase  in 
private  sector  debt,  notably  in  intercompany 
loans  of  foreign  investors  in  the  country,  was 
more than offset by lower public sector debt. At 
end-2017,  the  central  bank's  foreign  currency 
reserves  were  some  1.7%  higher  than  one  year 
earlier  and  covered  some  3  months  of 
prospective imports. They continued to increase 
in  the  beginning  of  the  new  year,  largely  as  a 
result of the government's sixth Eurobond issue. 

Monetary developments 

Consumer  price  inflation  relented  in  the  first 
quarter of the year. The CPI climbed by 1.5% y-
o-y  on  average,  following  on  a  rise  of  2.2%  in 
the  last three  months  of  2017.  This  was  mainly 
the result of more subdued price rises in utilities 
and  transport  cost,  in  line  with  lower  fuel,  gas 
and  electricity  prices.  Food  prices  increased  at 
about the same rate as in the preceding quarter. 
Annual  growth  of  broad  money  (M4)  slowed 
down  to  5.4%  on  average  in  the  first  quarter  (-
1.4pps),  with  currency  in  circulation,  demand 
deposits  and  short-term  deposits  all  registering 
more  subdued 
increases.  The  central  bank 
reduced  the  key  interest  rate,  the  CB  bills  rate, 
by a further 25bp in March, to 3%.  

Financial sector 

Credit  growth  to  the  private  sector  picked  up 
further  in  the  fourth  quarter  to  5.4%  y-o-y 
(+0.6pps  compared  to  the  third  quarter).  The 
bulk of the increase came from household loans 

of 

share 

The  spread  between  Denar  loans  (-10bps  to 
5.9%)  and  deposits  (-10bps  to  2.1%)  remained 
unchanged  between  November  and  February. 
Rates  on  foreign  currency  loans  dropped  by  20 
bps  to  4.6%,  and  remained  unchanged  for 
deposits,  at  0.8%,  hence  narrowing  banks' 
spreads.  The 
foreign-currency 
denominated in total loans dropped further in the 
fourth quarter, by 1pp, to 42.5%. The funding of 
loans by deposits remained solid, with the loan-
to-deposit 
clients  
decreasing  to  87.7%  (-1.7pps  q-o-q).  Capital 
adequacy of the banking sector remained robust, 
with  the  ratio  of  regulatory  capital  to  risk-
weighted  assets  at  15.7%,  marginally  below  its 
level  at  the  end  of  the  third  quarter  (-0.5pps), 
and still almost double the regulatory minimum. 
The  ratio  of  non-performing  to  total  loans 
(financial  and  non-financial  sector)  declined 
further, by 0.2pps q-o-q, to 6.1%.  

for  non-financial 

ratio 

Fiscal developments 

In  2017, 
the  general  government  deficit 
amounted  to  2.7%  of  GDP,  which  is  below  the 
revised  target  of  2.9%.  Both  revenue  and 
expenditure were higher by 6% y-o-y. Net VAT 
receipts  made  up  27%  of 
total  revenue, 
accounting for some 19% of the annual revenue 
increase. This  takes  into  account  repayments  of 
VAT owed by the government. Capital spending 
was  some  16%  lower  than  planned,  at  some 
3.3%  of  GDP.  In  the  first two  months  of  2018, 
revenue  had  increased  by  5.8%  y-o-y,  and 
expenditure  by  3.8%.  However, 
capital 
expenditure  was  some  64%  below  its  pre-year 
level, while transfer payments were up by 17%, 
largely  as  a  result  of  government  subsidies  to 
help  employers  fund  an  increase  in  minimum 
wages.  The  government  set  the  annual  deficit 
target for  2018  at  2.7%,  the  same  as  the  deficit 
realised 
in  2017.  The  accumulated  budget 
balance during the first two months of 2018 was 
lower  by  10%  y-o-y.  Government  debt,  which 
had  risen  significantly  between  2008  and  2016, 
amounted  to  39.3%  of  estimated  GDP,  slightly 
below its level of end-2016 (39.5%). Public debt 
amounted to 47.5% of GDP, a decline by 0.9pps 
compared  to  one  year  earlier.  The  level  of 
government-guaranteed  debt  of  state  enterprises 
dropped  in  2017  to  8.2%  of  GDP  (-0.6pps 
compared to end-2016)). 

14 

 
 
 
 
 
 
 
 
TABLE 

15 

European Commission, ECFIN-D-1The former Yugoslav Republic of Macedonia2013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1Balance12.311.417.524.025.6::25.726.6:27.127.3:Industrial production 1.2Ann. % ch103.2104.8104.9103.9100.2::97.6100.9:108.4103.1:Gross domestic product 1.3Ann. % ch2.93.63.82.90.02.73.20.21.2:N.A.N.A.N.A.Private consumption 1.4Ann. % ch1.92.24.43.12.93.53.42.92.7:N.A.N.A.N.A.Gross capital formation 1.5Ann. % ch0.510.78.313.3-4.52.23.2-9.4-1.0:N.A.N.A.N.A.Construction 1.6Ann. % ch33.82.38.612.3-13.7::-11.6-19.5:N.A.N.A.N.A.Retail sales 1.7Ann. % ch-0.94.29.818.8-10.2::-8.4-8.0:9.56.7:2  Labour marketUnemployment 2.1% 29.028.226.324.022.421.421.022.322.1:N.A.N.A.N.A.Employment 2.2Ann. % ch4.31.01.72.42.72.22.12.11.9:N.A.N.A.N.A.Wages 2.3Ann. % ch1.21.02.72.02.60.41.52.93.1:5.3::3  External sector Exports of goods 3.1Ann. % ch2.917.09.411.519.8::14.119.0::::Imports of goods 3.2Ann. % ch-1.89.45.07.811.8::8.212.4::::Trade balance* 3.3% of GDP-22.9-21.7-20.1-19.1-17.9-18.3-18.7-17.9-17.9:N.A.N.A.N.A.Exports goods and services 3.4% of GDP42.347.748.750.054.8::53.855.1:N.A.N.A.N.A.Imports goods and services 3.5% of GDP60.464.965.064.768.8::67.768.8:N.A.N.A.N.A.Current account balance* 3.6% of GDP-1.6-0.5-2.0-2.7-1.3-2.4-2.3-1.9-1.3:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP-7.9-2.8-2.2-3.3-2.3::-2.5-1.7:N.A.N.A.N.A. International reserves 3.8mio EUR1 993.02 436.52 261.82 613.42 335.3::2 271.42 335.32 577.22 577.42 566.42 577.2 Int. reserves / months Imp 3.9Ratio5.66.35.66.04.8::4.84.8::::4  Monetary developments CPI 4.1Ann. % ch2.8-0.3-0.3-0.31.42.02.41.62.2:1.11.91.6Producer prices 4.2Ann. % ch0.4-1.2-4.1-0.10.4::0.51.0:1.90.9:Food prices 4.3Ann. % ch3.4-1.00.1-1.30.2::0.91.6:0.62.2:Monetary aggregate M4 4.4Ann. % ch4.08.08.24.46.1::6.85.8:5.37.4:Exchange rate MKD/EUR 4.5Value61.5861.6261.6161.6061.57::61.5861.5261.5661.5161.6461.53Nominal eff. exchange rate 4.6Index101.8102.9101.6102.6104.0::104.4105.1:105.3104.2:5  Financial indicatorsInterest rate (3 months-SKIBOR) 5.1% p.a.3.693.081.921.961.78::1.751.731.701.731.721.66Bond yield  5.2% p.a.8.047.467.086.616.21::6.166.03:5.95::Stock markets 5.3Index1 7261 7361 7311 8872 406::2 5542 5702 7562 6722 7742 821Credit Growth 5.4Ann. % ch4.38.49.14.63.1::4.85.4:6.16.8:Deposit growth  5.5Ann. % ch4.88.27.94.36.0::6.45.7:5.27.0:Non-performing loans 5.6% total11.911.610.36.36.4::6.66.3:N.A.N.A.N.A.6  Fiscal developmentsCentral government balance 6.1% of GDP-3.8-4.2-3.5-2.7-2.7-3.0-3.0-1.7-3.5:N.A.N.A.N.A.General government debt 6.2% of GDP34.038.138.139.539.340.440.937.838.7:N.A.N.A.N.A.f: ECFIN forecast Autumn 2017 published November 2017* Q figures refer to a 4 quarters moving average.ECFIN 2017Autumn forecast 
CHARTS 

16 

European Commission, ECFIN-D-1The former Yugoslav Republic of MacedoniaJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12-2-101234567820142015201620172018GDP growth% year-on-year202122232425262728293020142015201620172018Unemployment% of labour force-5-4-3-2-10120142015201620172018Current account balanceAnnual moving average,% of GDP-2-10123420142015201620172018InflationCPI, % year-on-year-4.2-3.5-2.7-2.7#N/A-5-4-3-2-1020142015201620172018General government balance% of GDP859095100105606162636420142015201620172018Exchange ratesLhs: Nom. MKD/EURRhs: REERIndex 2005=100 
 
MONTENEGRO 

Key developments 

On  31  January  2018,  Montenegro  submitted  to 
the  European  Commission  its  Economic  and 
Reform Programme (ERP 2018-2020). The ERP 
projects  economic  growth  to  decelerate  as  a 
result  of  fiscal  consolidation  and  the  fading 
contribution  of  investment.  The  government's 
ambitious  fiscal  adjustment  plan  relies  on 
achieving strong primary surpluses as of 2020 to 
set the public debt on a clear downward path. 

On  17  April,  the  Commission  presented  its 
stressing 
regular 
Enlargement 
Montenegro's  macroeconomic 
fiscal 
stability were strengthened but further efforts are 
to  address  persistent  challenges, 
required 
especially the high public debt burden. 

Package, 

and 

the 

implementation 

On  16  March  2018,  the  credit  ratings  agency 
Standard  and  Poor's  affirmed  Montenegro's 
B+/B'  long-  and  short-term  sovereign  credit 
marks.  The  stable  outlook  reflects  the  balance 
between 
of 
Montenegro's  fiscal  adjustment  programme  and 
economic  growth  risks.  On  4  April,  Moody's 
also  affirmed  Montenegro's  credit  rating  (B1) 
with  a  stable  outlook,  underlining  the  country's 
reliance  on  foreign  sources  of  finance  and  the 
fiscal  impact  of  the  highway  project  as  main 
challenges. 

risks 

Real sector  

Strong  infrastructure  investment  (both  public 
and private) keeps fuelling economic growth. In 
the  fourth  quarter  of  2017,  GDP  grew  by  4.0% 
y-o-y, slowing from a 4.7% y-o-y growth in the 
third quarter. Fixed capital formation surged by 
47.1% y-o-y, while private consumption growth 
decelerated  to  3.8%  y-o-y,  down  from  6.4%  in 
the previous quarter. Fiscal consolidation dented 
government  consumption  which  contracted  by 
1.8%  y-o-y.    The  contribution  of  net  exports  to 
the  poor 
growth  declined  as  a  result  of 
performance  of  exports  (-4%  y-o-y),  combined 
with  a  16.6%  y-o-y  surge  in  imports  owing  to 
investment  needs  and  retailers  restocking  in 
anticipation of the VAT increase announced for 
2018.  Overall,  thanks  to  the  second  and  third 
quarters' strong performance, the economy grew 
by 4.4% in 2017, up from 2.9% a year earlier. 

After  recording  annual  contraction  of  4.3%  in 
2017, 
industrial  production  seems  set  for 
recovery in 2018. Industrial output surged in the 
first  two  months  of  2018  by  39.3%  y-o-y  on 
in  electricity 
average,  driven  by  a  surge 
production  after  the  commissioning  of  a  wind 
farm and favourable weather conditions, also for 
hydropower production. Manufacturing recorded 
a  moderate  expansion  of  15%  y-o-y  in  the  first 
two  months  of  the  year,  driven  by  metal,  wood 
and  mineral  products.  However,  mining  output, 
in particular metal ores, contracted sharply. 

tourism  keeps 
The  strong  performance  of 
supporting  retail  sales.  After  realising 
the 
strongest  tourist  season  on  record  in  2017, 
foreign tourist arrivals surged by 36.2% y-o-y in 
the first two months of 2018. The higher number 
of visitors helped boost sales of local retailers, in 
particular  food,  which  recorded  a  12.4%  y-o-y 
growth  (in  constant  prices)  in  the  first  two 
months of the year. 

Labour market 

earlier. 

Unemployment  remains  high  outside  the  core 
tourism  season.  In  the  last  quarter  of  2017,  the 
unemployment  rate  (15-64  years  old)  bounced 
back  to  17.4%,  up  from  the  historical  low  of 
15.1%  reached  in  the  third  quarter  heavily 
influenced by the strong summer tourism season. 
Still,  there  was  some  minor  improvement  when 
compared with the fourth quarter of 2016, when 
the  unemployment 
stood  at  17.9%. 
rate 
However,  employment  growth  in  the  last 
quarter of 2017 remained unchanged from a 
year 
average 
Overall, 
unemployment  rate  declined  to  16.4%  in  2017, 
compared to 18.0% in 2016; while employment 
increased by 2.1% over the year. 
Recent  amendment  to  the  Law  on  Health 
Insurance  provides  adult  citizens  without  a  job 
the right to health care without a need to register 
as  unemployed.  As  a  result,  4,946  people, 
previously  registered  as  unemployed,  were 
removed from the Employment Agency records 
as  of  January  2018.  This  helped  reduce  the 
registered  unemployment  rate  to  19.1%  in 
March 2018, compared to 22.8% a year earlier. 

the 

Fiscal  consolidation  and  inflation  are  having  a 
negative  impact  on  real  wage  growth.  The 
continuation  of  last  year's  public  sector  salary 

17 

 
 
 
 
 
 
 
 
 
 
freeze and the increase of VAT and excise rates 
as of January 2018 resulted in a 2.8% y-o-y real 
decline  of  gross  wages  and  their  stagnation  in 
nominal terms in February. 

External sector  

Surging  investment  has  kept  broadening  the 
trade deficit. In 2017, the current account deficit 
surged by 12.0% y-o-y to reach 18.9% of GDP, 
up from 18.1% recorded a year earlier. Although 
goods  exports  grew  by  8.8%  y-o-y,  imports 
increased  by  an  even 
faster  12%  y-o-y, 
broadening  the  merchandise  trade  deficit  to 
43.9% of GDP compared to a 41.9% gap a year 
before. The other balances recorded positive and 
improving 
surplus 
increased  by  8.8%  y-o-y,  totalling  19.7%  of 
GDP,  while  the  surpluses  on  the  primary  and 
secondary  income  balances  amounted  to  2.1% 
and  3.2%  of  GDP  respectively.  The  current 
account deficit was largely covered by net FDI, 
totalling 11.2% of GDP, and other positive flows 
recorded  under  net  errors  and  omissions  worth 
an additional 3.4% of GDP. 

results.  The 

services 

Monetary developments 

The  increases  in  January  2018  of  VAT,  excise 
duties  and  regulated  electricity  prices  are 
keeping  inflationary  pressures  up.  As  a  result, 
consumer prices rose by 3.6% and 3.7% y-o-y in 
the  first  two  months  of  2018,  compared  to  an 
average of 2.8% in 2017. In February alone, the 
increase  of  excises  on  tobacco  boosted  overall 
inflation  by  1.64  pps.  By  contrast,  electricity 
price increases had a much more modest impact 
on annual inflation in February (0.1 pps). 

Financial sector 

In  2018,  Montenegrin  banks  started  reporting 
International  Financial  Reporting 
applying 
Standards (IFRS9). Preliminary data for the first 
two  months  of  2018  indicate  a  deceleration  in 
credit  growth,  to  5.5%  y-o-y  in  February  from 
11.8%  at  the  end  of  2017.  In  February,  lending 
to households slowed down to 5.5% y-o-y, while 
corporates'  credit  recorded  marginal  contraction 
of 0.2% y-o-y. 

By  contrast,  bank  deposits  kept  growing  fast  at 
the beginning of 2018, recording a robust annual 
expansion  of  14.5%  y-o-y  in  February.  They 
continued  to  be  driven  by  households'  deposits 
which  expanded  by  11.1%  y-o-y,  while 

corporate deposits increased by only 2.7% y-o-y. 

Despite  the  increase  in  credit  activity,  the  ratio 
of  non-performing  loans  remained  stable  in 
February:  NPLs  accounted  for  7.3%  of  total 
loans, a similar level as at the end of 2017. 

In  February,  the  average  effective  interest  rate 
on new loans rose 0.19 pps. y-o-y to 7.07% after 
dropping  0.8  pps.  y-o-y  the  month  before. 
Effective interest rates on business loans used to 
acquire fixed capital increased 0.57 pps. y-o-y to 
6.58%,  while  the  interest  rate  on  consumer  and 
mortgage loans fell by 0.48 and 0.3 pps. y-o-y to 
4.14% and 5.61%, respectively. 

Fiscal developments 

Fiscal consolidation struggled to contain budget 
deficits  due  to  contingent liabilities  and  a  surge 
in  capital  spending.  The  consolidated  budget 
deficit  totalled  5.4  %  of  GDP  in  2017,  1.2  pps 
higher  than  the  revised  budget  target.  The 
overrun was driven by unexpected repayment of 
liabilities from past years and the intensification 
of  the  highway  works,  which  was  only  partly 
offset by higher tax collection induced by strong 
economic  growth.  In  January  2018,  the  central 
government  budget  deficit  totalled  0.6%  of  the 
projected  annual  GDP,  substantially  below  the 
planned  deficit  of  1.5%  of  GDP,  as  a  result  of 
slightly  better  than  planned  revenue  collection 
combined 
(-19.4%) 
underspending of capital budget compared to the 
plan. 

substantial 

with 

On  19  March,  the  parliament  approved  the 
revision  of  the  2018  budget,  increasing  the 
central  government  deficit  to  3.2%  of  GDP,  up 
from  2.6%  of  GDP  in  the  original  plan.  The 
revision was necessary to fund the acquisition of 
a  41%  private  stake  in  the  state  utility  EPCG, 
and to repay debts of public companies. 

The  resumption  of  the  highway  works  in  2017 
brought new debt, increasing the debt stock by 2 
pps  to  65.1%  of  GDP  by  the  end  of  the  year. 
External  liabilities  account  for  81.2%  of  the 
total.  On  29  March,  the  government  adopted  a 
public  debt  management  strategy  for  the  period 
2018-2020.  One  of the first  measures  under the 
strategy was the launch on 4 April of a tender to 
repurchase up to EUR 400 mn (or 9% of GDP) 
worth  of  Eurobonds  with  a  view  to  managing 
upcoming debt redemption and to extending the 
debt maturity profile. 

18 

 
 
 
 
 
 
 
 
TABLE 

19 

European Commission, ECFIN-D-1MONTENEGRO2013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1Balance8.711.19.83.04.5::6.0-0.34.41.46.35.5Industrial production 1.2Ann. % ch10.7-10.57.9-2.1-4.3::-1.32.6:52.429.6:Gross domestic product 1.3Ann. % ch3.51.83.42.94.43.03.34.74.0:N.A.N.A.N.A.Private consumption 1.4Ann. % ch1.62.92.25.44.22.52.86.43.8:N.A.N.A.N.A.Gross fixed capital formation 1.5Ann. % ch10.7-2.511.927.515.83.51.58.947.1:N.A.N.A.N.A.Construction index 1.6Ann. % ch9.72.05.831.551.5::40.469.7:N.A.N.A.N.A.Retail sales 1.7Ann. % ch11.22.44.24.05.2::5.06.0:5.74.8:2  Labour marketUnemployment 2.1% 19.518.217.818.016.416.716.015.117.4:N.A.N.A.N.A.Employment 2.2Ann. % ch1.46.61.91.12.12.32.03.10.0:N.A.N.A.N.A.Wages 2.3Ann. % ch-0.2-0.30.23.52.02.02.41.11.3:0.0-0.1:3  External sector Exports of goods 3.1Ann. % ch2.1-9.7-9.06.28.8::28.7-5.3:5.813.3:Imports of goods 3.2Ann. % ch-2.70.63.212.011.6::6.822.4:18.64.3:Trade balance* 3.3% of GDP-39.5-39.8-40.0-41.9-43.9-44.0-42.4-41.8-43.9:-44.3-44.4:Exports goods and services 3.4% of GDP41.340.142.140.541.0::66.525.8:N.A.N.A.N.A.Imports goods and services 3.5% of GDP61.460.060.662.965.2::53.070.0:N.A.N.A.N.A.Current account balance* 3.6% of GDP-14.5-15.2-13.2-18.1-18.9-16.7-16.0-16.2-18.9:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP9.610.216.99.411.2::9.611.2:N.A.N.A.N.A.International reserves 3.8mio EUR423.7544.7673.7803.0897.7::787.8897.7::::Int. reserves / months Imp 3.9Ratio2.93.74.44.74.7::4.34.7::::4  Monetary developmentsHICP 4.1Ann. % ch1.8-0.51.40.12.82.22.03.32.9:3.63.7:Producer prices 4.2Ann. % ch1.70.20.3-0.10.4::0.0-0.2:-0.40.9:Food prices 4.3Ann. % ch4.0-1.43.0-0.91.9::1.50.7:-0.5-0.8:M21 4.4Ann. % ch:::::::::::::Exchange rate EUR/EUR 4.5Value1.001.001.001.001.00::1.001.001.001.001.001.00Nominal eff. exchange rate 4.6IndexN.A.N.A.N.A.N.A.N.A.::N.A.N.A.N.A.N.A.N.A.N.A.5  Financial indicatorsInterest rate (3 months) 5.1% p.a.3.391.60::2.35::::::::Bond yield  5.2% p.a.3.191.260.501.581.71::1.550.200.490.410.57:Stock markets 5.3Index9 52810 69511 95611 11510 952::10 85410 38410 31410 28710 32810 328Credit growth 5.4Ann. % ch3.1-1.90.81.311.8::7.711.8:5.35.5:Deposit growth 5.5Ann. % ch5.910.013.79.413.8::9.913.8:13.914.5:Non-performing loans 5.6% of total18.416.813.410.37.3::7.47.3:7.47.3:6  Fiscal developmentsGeneral government balance 6.1% of GDP-4.6-2.9-8.3-3.6-5.4-5.6-2.70.2-3.2::::General government debt 6.2% of GDP56.958.765.263.465.173.274.956.660.4::::f: ECFIN forecast Autumn 2017 published November 2017* Q figures refer to a 4 quarters moving average.ECFIN 2017Autumn forecast 
 
CHARTS 

20 

European Commission, ECFIN-D-1MONTENEGROJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12012345620142015201620172018GDP growth% year-on-year1015202520142015201620172018Unemployment% of labour force-25-20-15-10-5020142015201620172018Current account balanceAnnual movingaverage, % of GDP-2024620142015201620172018Inflation% year-on-year-2.9-8.3-3.6-5.4-10-8-6-4-2020142015201620172018General government balance% of GDP0.00.51.01.52.020142015201620172018Exchange rate Lhs: Nom. EUR/EUR 
 
SERBIA 

Key developments 

In  February,  Serbia  successfully  completed  its 
3-year  precautionary  Stand-By  Arrangement 
with the IMF.  In March, the authorities and the 
IMF  engaged  in  discussions  on  a  possible  new 
programme, 
to  be  supported  by  a  Policy 
Coordination Instrument –  a recently introduced 
non-financing  arrangement  for  countries  which 
do not need IMF financial support. 

submitted 

The  Serbian 
its 
government 
2018-2020 Economic Reform Programme to the 
Commission  on  31  January  2018.  It  forecasts 
economic  growth  to  pick  up  markedly  to  3.5 % 
in 2018 and 2019 and to reach 4.0 % in 2020 on 
the back of recovering private consumption and 
robust export and investment growth. Inflation is 
expected to stay close to the central bank target, 
while  net 
investments  are 
projected  to  fully  cover  the  current  account 
deficit.  The  programme  targets  a  medium-term 
budget  deficit  of  0.5  %  of  GDP,  which  is 
sufficient  to  ensure  fiscal  sustainability  and 
further reduce government debt. 

foreign  direct 

In  mid-April, 
the  European  Commission 
presented  its  annual  enlargement  package.  It 
stated  that  as  regards  the  economic  criteria  for 
EU membership, Serbia has made good progress 
and  is  moderately  prepared  in  developing  a 
functioning  market  economy.  Serbia  has  also 
made some progress and is moderately prepared 
to  cope  with  competitive  pressure  and  market 
forces within the EU. 

Real sector  

Weather-related  supply  shocks  trimmed  growth 
to  just  below  2  %  in  2017,  well  below  initial 
expectations.  However,  economic  expansion 
gathered  pace  in  the  fourth  quarter  with  real 
GDP  growing  by  2.5 %  y-o-y,  sustained  by  a 
12.4 % increase in gross fixed capital formation 
in 
and  a  2  pps  contribution  of  changes 
inventories.  Household 
consumption 
expanded  steadily  at  1.9 %  y-o-y  as  gains  in 
employment 
Government 
consumption also increased, albeit only by 1.1 % 
y-o-y.  Exports  growth  decelerated  to  7.5 % 
y-o-y,  while  strong  domestic  demand  drove 
imports growth up to 12.0 % y-o-y, resulting in a 

firmed 

final 

up. 

3.1  pps  negative  contribution  of  net  exports  to 
growth in the fourth quarter. 

With 
the  notable  exception  of  agriculture 
(-9.5 %  y-o-y),  which  continued  to  suffer  the 
consequences  from  the  drought  in  the  summer, 
all other  sectors  increased in  the  fourth  quarter. 
Linked  to  the  strong  investment  performance, 
construction grew by a staggering 17.8 % y-o-y. 
trade, 
Sectors 
transportation  and  storage,  and  accommodation 
and food service activities also expanded (4.9 % 
y-o-y). The recovery of industrial activity (3.7 % 
y-o-y) continued apace as well. 

like  wholesale  and 

retail 

industrial  production 

Short-term indicators point at an acceleration of 
growth in the beginning of 2018. In the first two 
increased  by 
months, 
6.9 %  y-o-y.  Manufacturing  activity  also  grew 
strongly  (8.0 %),  with  21  out  of  24  sub-sectors 
trajectory.  While  mining  and 
on  a  rising 
broadly 
remained 
quarrying 
unchanged,  the  sector  of  electricity,  gas,  steam 
and  air  conditioning  supply  expanded  by  6.2 % 
y-o-y.  Retail  trade  has  also  picked  up  in  the 
period January-February, 4.5 % y-o-y, indicating 
rising domestic consumption. 

production 

Labour market 

According  to  LFS  data,  the  unemployment  rate 
of population aged 15 and above stood at 14.7 % 
in  the  last  quarter  of  2017.  It  went  up  in 
comparison  to  the  third  quarter,  driven  by 
seasonal  factors,  and  was  also  up  by  1.7  pps 
y-o-y. The number of unemployed increased by 
65.7 thousand or 16.0 % y-o-y as the number of 
those entering the labour market (97.9 thousand) 
surpassed gains in employment (32.2 thousand). 
Employment  increased  in  the  formal  segment 
(56.5 
informal 
in  agriculture, 
employment, 
declined by 24.3 thousand. 

y-o-y),  while 

in  particular 

thousand 

Registered  employment 
increased  by  2.8 % 
y-o-y  in  the  fourth  quarter,  close  to  the  2017 
average  of  2.6 %  y-o-y.  The  National 
Employment  Service  data  on 
registered 
unemployment  confirm  the  generally  positive 
labour  market  dynamics  –  the  number  of 
registered jobseekers fell by 8.8 % y-o-y in 2017 
and by 10.1 % y-o-y in the first quarter of 2018. 
Despite 
registered 
unemployment,  wage  growth  was  moderate  last 

steady  decline 

in 

a 

21 

 
 
 
 
 
 
 
 
 
year  with  gross  real  wages  increasing  by  0.9 % 
y-o-y. In the beginning of 2018, however, wages 
went  up  (4.8 %  y-o-y  in  January),  impacted  by 
wage indexations in the government sector. 

External sector 

In  2017,  the  current  account  deficit  nearly 
doubled in euro terms, reaching EUR 2.1 billion 
or  5.7 %  of  GDP,  compared  to  3.1 %  a  year 
before.  Its  worsening  was  driven  by  a  larger 
trade deficit and investment income outflows. In 
January  2018  the  merchandise  deficit  expanded 
further  by  16.1 %  y-o-y.  However,  higher 
surpluses in trade of services and lower primary 
income  deficit  helped  containing  the  current 
account deficit and it fell by close to 50 % y-o-y. 

in 

to  EUR 749  million 

last  year, 
After  growing  by  double-digits 
merchandise  trade  continued  expanding  in  the 
first two months of 2018. Exports in euro terms 
grew  by  13.8 %  and  imports  by  16.8 %  y-o-y. 
As a result, the trade deficit widened by 27.7 % 
y-o-y 
the  period 
January-February. Manufacturing exports, which 
represent  94 %  of  all  goods  exports,  increased 
across  the  board.  The  only  exception  was 
exports of food products, which were negatively 
impacted by the lower cereals production due to 
the  drought 
last  year.  Reflecting  growing 
imports  of 
domestic  demand,  merchandise 
non-durable  consumer  and  capital  goods 
increased  by  13.8 %  and  13.7 %  y-o-y 
respectively in the first two months. 

Monetary developments 

After ending 2017 exactly at the midpoint of the 
target tolerance band of the central bank (3.0 %), 
inflation  fell  in  the  first  quarter  of  the  year  to 
1.4 % y-o-y in March. Core inflation, excluding 
food,  energy,  alcohol  and  tobacco,  declined  as 
well  to  its  lowest  level  (0.8 %  y-o-y)  since  the 
introduction  of  the  consumer  price  index.  The 
central  bank  reacted  by  lowering  its  key  policy 
rate in two steps of 25 bps each in March and in 
April  from  3.50 %  to  3.00 %.  In  April,  the 
central  bank  has  also  narrowed  the  interest  rate 
corridor from ±1.5 to ±1.25 pps. 

Contrary to previous seasonal patterns, since the 
beginning  of  the  year  the  dinar  exchange  rate 
against  the  euro  remained  stable.  However, 
given  strong  base  effects,  the  dinar  appreciated 
by  4.5 %  y-o-y  against  the  euro  and  by  17.4 % 
y-o-y  against  the  US  dollar  in  the  first  quarter, 
despite  central  bank  interventions  on  the  forex 
market, buying a net EUR 400 million. The real 
effective appreciation of the dinar accelerated to 

reserves 

8.0 %  y-o-y  in  February.  The  NBS  foreign 
exchange 
increased  by  EUR 273 
million  since  the  end  of  2017  and  stood  at 
EUR 10.2 billion in March, covering  more than 
five  months'  worth  of  imports  of  goods  and 
services. 

Financial sector 

increase 

supported  an  18.0 % 

In  February,  domestic  claims  were  down  1.9 % 
since the beginning of the year. The decline was 
largely a result of a strong budget performance, 
which 
in 
government  deposits  in  the  first  two  months. 
to  non-government  sectors  remained 
Loans 
unchanged  over  the  same  period  as  a  small 
increase  in  lending  on  households  was  largely 
neutralised  by  a  fall  in  loans  to  companies.  On 
an  annual  basis,  the  growth  in  lending  to 
households  decelerated 
in 
February,  while  corporate  loans  increased  by 
0.5 %  y-o-y.  The  underlying  credit  growth, 
however,  is  much  stronger  as  the  appreciating 
dinar  and  sizeable  NPL  write-offs  had  a  strong 
impact  on  the  headline  figures.  The  gross 
non-performing  loan  ratio  declined  further  and 
stood at 9.9 % by the end of 2017. 

to  7.5 %  y-o-y 

Fiscal developments 

In 2017, for the first time in more than a decade, 
the  consolidated  government  budget  was  in 
surplus.  The  outcome,  at  1.2 %  of  GDP, 
outperformed  by  far  both  the  initial  and  the 
revised budget deficit targets. As in the previous 
2  years,  the  better-than-expected  result  was 
mainly driven by strong revenue performance. 

The  robust  revenue  growth  continued  in  the 
beginning of 2018. In the first two months, total 
revenue  rose  by  7.6 %  y-o-y,  driven  by  strong 
increases in income tax receipts. Revenues from 
taxes  on  imports  and  consumption  also  grew 
strongly,  despite  a  steep  fall  in  domestic  VAT 
due  to  large  credit  refunds.  Total  expenditure 
increased  by  6.7 %  y-o-y,  while  the  overall 
budget  surplus  was  22.7 %  higher  than  in  the 
corresponding  period  last year.  Following  wage 
and 
on 
employees  went  up  11.8 %  y-o-y  and  on 
pensions by 4.0 % y-o-y. Given base effects and 
markedly  better  execution,  capital  expenditure 
tripled  in  the  first  2  months  of  the  year.  The 
strong  dinar  and  good  budget  performance 
helped lower interest payments by 13.2 % y-o-y. 
In February, government debt stood at EUR 23.3 
billion  or  57.9  %  of  the  estimated  full-year 
GDP. 

expenditure 

increases, 

pension 

22 

 
 
 
 
 
 
 
 
TABLE 

23 

European Commission, ECFIN-D-1SERBIA2013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1BalanceN.A.N.A.N.A.N.A.N.A.::N.A.N.A.N.A.N.A.N.A.N.A.Industrial production 1.2Ann. % ch5.6-6.18.44.83.4::6.33.5:10.63.3:Gross domestic product 1.3Ann. % ch2.6-1.80.82.81.93.33.52.22.5:N.A.N.A.N.A.Private consumption 1.4Ann. % ch-0.4-1.30.40.81.82.83.21.81.9:N.A.N.A.N.A.Gross fixed capital formation 1.5Ann. % ch-12.0-3.65.65.16.25.15.66.212.4:N.A.N.A.N.A.Construction index 1.6Ann. % ch-24.0-3.813.15.19.3::12.925.1:N.A.N.A.N.A.Retail sales 1.7Ann. % ch-5.32.01.47.73.3::3.72.3:7.12.0:2  Labour marketUnemployment 2.1% 22.119.217.713.515.311.69.512.914.7:N.A.N.A.N.A.Employment 2.2Ann. % ch3.710.10.65.62.82.02.12.41.2:N.A.N.A.N.A.Wages 2.3Ann. % ch5.71.2-0.43.83.9::3.93.0:6.8::3  External sector Exports of goods 3.1Ann. % ch25.81.57.911.611.7::12.77.8:21.66.7:Imports of goods 3.2Ann. % ch5.10.15.84.214.5::14.015.5:21.612.5:Trade balance* 3.3% of GDP-13.0-13.0-13.0-10.5-12.3-10.7-10.5-11.4-12.3:N.A.N.A.N.A.Exports goods and services 3.4% of GDP41.243.446.750.052.4::52.552.4:N.A.N.A.N.A.Imports goods and services 3.5% of GDP51.954.256.457.561.3::60.661.3:N.A.N.A.N.A.Current account balance* 3.6% of GDP-6.1-6.0-4.7-3.1-5.7-5.7-5.8-4.6-5.7:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP3.83.75.45.56.6::6.46.6:N.A.N.A.N.A. International reserves 3.8mio EUR11 188.89 907.210 378.010 204.69 961.7::10 635.69 961.7:9 647.610 234.9: Int. reserves / months Imp 3.9Ratio8.77.77.67.26.1::6.86.1:5.86.1:4  Monetary developmentsCPI 4.1Ann. % ch7.92.11.41.13.13.33.03.02.91.61.91.51.4Producer prices 4.2Ann. % ch0.80.20.72.22.6::3.32.60.81.40.50.8Food prices 4.3Ann. % ch8.0-0.91.9-0.33.3::3.53.7:2.11.1:M3 4.4Ann. % ch4.67.66.611.63.6::5.63.6:3.93.5:Exchange rate RSD/EUR4.5Value113.10117.23120.74123.09121.41::119.76119.11118.42118.61118.38118.27Nominal eff. exchange rate 4.6Index74.068.466.665.369.2::69.269.2:69.970.2:5  Financial indicatorsInterest rate (BEONIA) 5.1% p.a.8.826.764.752.702.68::2.732.392.382.372.512.27Bond yield  (12 months)5.2% p.a.10.679.187.274.63:::::::::Stock markets 5.3Index1 0351 2151 3591 3831 584::1 5751 6191 6071 6461 6051 568Credit growth 5.4Ann. % ch-6.55.87.09.02.2::-2.12.2:2.00.3:Deposit growth 5.5Ann. % ch3.37.66.511.43.3::5.03.3:4.03.7:Non-performing loans 5.6% total21.421.521.617.09.9::12.2::N.A.N.A.N.A.6  Fiscal developmentsGeneral government balance* 6.1% of GDP-5.5-6.6-3.7-1.31.20.00.03.3-2.4:N.A.N.A.N.A.General government debt 6.2% of GDP59.670.474.771.961.563.961.564.661.5:57.257.9N.A.f: ECFIN forecast Autumn 2017 published November 2017* Q figures refer to a 4 quarters moving average.ECFIN 2017Autumn forecast 
 
CHARTS 

24 

European Commission, ECFIN-D-1SERBIAJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12-5-4-3-2-101234520142015201620172018GDP growth% year-on-year1012141618202220142015201620172018Unemployment%  LFS-8-7-6-5-4-3-2-1020142015201620172018Current account balanceAnnualized,% of GDP01234520142015201620172018InflationCPI, % year-on-year-6.6-3.7-1.31.2#N/A-8-7-6-5-4-3-2-101220142015201620172018General government balance% of GDP11011512012513013510511011512012513020142015201620172018Exchange rateLhs NominalRhs REERIndex 2005=100 
TURKEY 

Key developments 

submitted 

its 
government 
The  Turkish 
2018-2020 Economic Reform Programme which 
forecasts  economic  growth  of  5.5 %  in  every 
single year between 2018 and 2020 on the back 
of  strong  private  consumption  and  investment 
growth  and  supported  by  net  trade.  Inflation  is 
expected  to  come  down  to  the  central  bank 
target at the end of the programme horizon. The 
programme  targets  a  decline  in  the  general 
government  budget  deficit  from  1.9  %  of  GDP 
in 2018 to 1.5% of GDP in 2020. 

European 

Commission's 

annual 
Tthe 
enlargement  package  adopted  on  17  April, 
confirmed  that  Turkey  can  be  considered  a 
functioning market economy but noted there was 
backsliding.  Turkey  has  also  made  some 
progress  and  has  a  good  level  of  preparation  in 
coping  with  competitive  pressure  and  market 
forces within the EU. 

Real Sector 

According  to  Turkstat's  estimates  published  on 
29  March  2018,  real  GDP  decelerated  to  7.3% 
year-on-year  in  the  fourth  quarter,  down  from 
11.3%  in  the  previous  quarter.  However,  the 
quarterly  growth 
slight 
rate 
acceleration  of  economic  activity;  it  increased 
from  1.3%  in  the  third  quarter  to  1.8%  in  the 
fourth  quarter.  An  annual  growth  rate  of  7.4% 
was  registered  over  full  2017,  taking  into 
account an upward revision of the annual growth 
rate for the first three quarters totalling 0.3%-pt,.  

suggests  a 

On  the  expenditure  side,  gross  fixed  capital 
formation saw a strong loss in momentum in the 
fourth  quarter,  dropping  from  an  upwardly 
revised 13.2%  for the third quarter to 6.0% y-o-
y  with  both  investments  in  productive  capital 
and  construction  declining  sharply.  Household 
consumption  growth  took  a  hit  as  well,  but 
remained 
relatively  solid  at  6.7%  y-o-y, 
following  an  exceptionally  high  growth  in  the 
previous  quarter.  Government  consumption 
accelerated to 7.4% y-o-y. The annual growth of 
total exports decelerated from 17.9% in the third 
to  9.3%  in  the  fourth  quarter,  whereas  the 

growth of total imports accelerated from 15.0% 
to 22.7%.  

its 

average 

since  2010 

The services sector (+9.6% y-o-y) witnessed the 
largest increase in real value added in the fourth 
quarter.  After  very  strong  growth  in  the  third 
quarter,  construction  (+5.8%  y-o-y)  grew  less 
(+11.2%). 
than 
Manufacturing  growth  slowed  down 
to  its 
average since 2010 (8.2%). Industrial production 
increased  by  8.5%  y-o-y,  a  slowdown  from  the 
10.4%  registered  in  the  third  quarter  but  still 
faster than on average since 2010 (+5.3%). The 
production of passenger cars, accounting for two 
thirds of vehicle production, fell by 9.0% which 
was  the  main  reason  for  vehicles  production 
being essentially flat (+0.1% y-o-y).  

High frequency indicators for the first quarter of 
2018  hint  at  continued  expansion  albeit  with 
some  suggestion  of  easing  towards  the  end  of 
the  quarter.  The  Markit  PMI    index  stayed  in 
optimistic  territory  even  if  it  fell  to  51.8  in 
March  after  reaching  its  highest  point  in  three 
in  January.  ECFIN's  own  sentiment 
years 
indicators 
industrial 
for  construction  and 
confidence were  just above historical average in 
the  first  quarter;  a  strong  improvement  for 
construction  from  2017  Q4  and  a  confirmation 
of  positive  sentiment  for  industry.  Services 
confidence  continued  to  hover  around  break-
strong 
even.  Retail 
developments  in  retail  sales  at  the  beginning  of 
the quarter but some softening towards the end. 

confidence 

reflected 

Labour market 

In the fourth quarter, annual employment growth 
increased  to  5.4%,  up  from  an  already  strong 
4.5%  growth  in  the  third  quarter,  with  the 
strongest  growth  rate  again  registered  in  jobs 
requiring  vocational 
training.  Employment 
growth  well  above  labour  force  growth  (3.6%) 
pushed  down  the  unemployment  rate  (9.9% 
seasonally  adjusted)  to  below  10%  for  the  first 
time since 2016 Q1. The unemployment rate for 
higher  educated  (11.5%  )  and  for  those  with 
vocational  training  (10.9%)  improved  the  most 
best  while  the  unemployment  rate  for  the 
illiterate  (6.0%)  was  still  the  lowest  despite  an 

25 

 
 
 
 
 
 
 
 
 
increase  from  2017  Q3.  Hourly  labor  costs 
growth accelerated further to 14.0% y.o.y in the 
fourth  quarter,  with  the  strongest  increase  in 
services (14.4%). Labour productivity grew at a 
substantial  rate  (+5.3%  y.o.y.)  as  producers  are 
the  number  of 
still  reluctant 
increase 
to 
in 
increases 
employees  regardless  of  high 
output.  According  to  the  latest  surveys,  the 
largest  optimism  on  employment  was  found  in 
the  industrial  sector  in  the  first  quarter.  In  the 
initial  optimism  waned 
construction  sector 
retail 
during 
sector 
the 
the  quarter. 
employment  perspectives  saw 
less  of  an 
improvement  than  usual  over  the  first  quarter 
that  ended  positive  but  relatively  weak  in 
comparison with earlier years.  

In 

External sector  

The current account deficit increased to 5.5% of 
GDP on a twelve month rolling basis at the end 
of  2017  driven  by  a  strong  deterioration  in  the 
merchandise  trade  balance  (-6.9%  of  GDP) 
which  was  only  partially  off-set  by  an 
improvement  in  the  services  balance  (+2.2%  of 
GDP).  The  deterioration  continued  in  the  first 
two  months  of  2018  with  the  12-month  rolling 
current account deficit rising by 55.2% y.o.y. to 
close to 6% of GDP. Gross financial flows into 
Turkey  increased  by  60%  y-o-y  in  the  twelve 
months  up  to  February  again  driven  by  a  surge 
in portfolio inflows (+189% y.o.y), in particular 
debt  securities  (+221%),  while  net  FDI  inflows 
continued  to  decrease  (-17%).  Portfolio  inflows 
accounted  for  50%  of  gross  inflows  over  that 
period,  FDI  for  20%  and  other  investment  for 
30%.  Official  reserves  decreased  by  USD  4.8 
billion  or  4.2%  y.o.y  in  the  twelve  months  till 
February  bringing  their  level  to  USD  110 
billion, corresponding to 5.7 months of imports. 
The foreign exchange liabilities of non-financial 
companies decreased by USD 3 bn to USD 212 
billion  (around  24%  of  GDP)  in  the  twelve 
months till January, bringing their total to USD 
222 bn.  

Monetary developments 

At  its  meeting  on  7  March,  the  Turkish  central 
bank  decided  to  keep  its  monetary  policy 
unchanged  at  its  "tight  stance".  The  effective 
weighted  interest  rate  on  central  bank  funding 
remained  at  12.75%  or  1.24%-pt  higher  than  a 
the 
year  earlier. 
overshooting  of  the  inflation  target,  the  central 
bank  pointed  to  lira  depreciation  as  the  main 

letter  explaining 

its 

In 

factor,  followed  by  commodity  and  food  price 
inflation,  aggregate 
developments,  services 
in 
demand  conditions  as  well  as  changes 
inflation  expectations  and  pricing  behaviour.  In 
its  January  inflation  report,  the  central  bank 
revised  again  upwards  the  end-of-year  inflation 
projection  for  end-2018  by  0.9%-pt  to  7.9%. 
Inflation  in  the  first  quarter  of  2018  averaged 
10.3%,  down  from  12.3%  in  2017  Q4  on  the 
back of easing food price rises.  

Financial sector 

The Borsa Istanbul Index reached a historic high 
on  29  January  2018  but  decreased  thereafter  to 
close  the  first  quarter  1.2%  lower  than  at  its 
start.  Interest  rates  along  the  benchmark  yield 
curve  have  increased  by  180  bps  (10  yrs,  now 
12.5%)  to  252  bps  (2  years  maturity,  now 
12.8%).  Bank  loans  continued  to  grow  strongly 
in the first quarter (+19.7% y.o.y.) although at a 
slightly  reduced  pace  from  2017  (+21.2%). 
Banks'  net  profits  increased  by  an  average  of 
10.9%  y-o-y  in  the  first  two  months  of  2018, 
following  an  increase  by  30.8%  y-o-y  in  2017. 
The  capital  adequacy  ratio  of  banks  (16.7)  was 
slightly  higher  in  the  first  two  months  of  2018 
than  on  average  in  2017  (16.5).  The  NPL  ratio 
stood  at  2.9%  in  th  first  quarter,  slightly  lower 
than  in  2017.  The  loan-to-deposit  ratio  set  yet 
another all-time high in January 2018 (127.1).  

Fiscal developments 

The  central  government  registered  a  budget 
deficit of 1.5% of GDP in 2017, overperforming 
the  deficit  target  that  was  upwardly  revised  to 
1.9% of GDP in October largely on the back of 
positive  developments  in  revenue  collection. 
The central government budget deficit increased 
to  TRY  20.4  bn  in  2018  Q1  from  14.9  bn  in 
(+17.7%  y.o.y) 
2017  Q1  as  expenditures 
increased faster than revenues (+15.7%).  

is  expected 

The  government  submitted  early  March  a  VAT 
reform that aims to deal faster with VAT returns. 
The  VAT  reform 
to 
retrospective  VAT  repayments  of  maximum 
TRY  140  bn  of  which  TRY  70  –  80  bn  to  the 
private  sector.  The  government  also  announced 
an  investment  package  worth  TRY  135  bn  that 
will  focus  more  on  large  investment  projects 
than its predecessor incentives programme. 

lead 

to 

26 

 
 
 
 
 
 
 
 
TABLE 

27 

European Commission, ECFIN-D-12013201420152016201720182019Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1Balance106.6104.6103.5105.2108.0::110.6106.4110.3108.3110.8111.9Industrial production 1.2Ann. % ch3.53.52.91.86.3::10.27.8::::Gross domestic product 1.3Ann. % ch8.55.26.13.27.44.04.111.37.3:N.A.N.A.N.A.Private consumption 1.4Ann. % ch8.02.95.43.66.24.54.011.16.7:N.A.N.A.N.A.Gross fixed capital formation 1.5Ann. % ch13.85.19.32.27.34.04.213.26.0:N.A.N.A.N.A.Construction index 1.6Ann. % ch16.438.7-9.016.557.4::222.1-17.9:N.A.N.A.N.A.Retail sales 1.7Ann. % ch6.23.86.72.25.7::10.15.6:10.7::2  Labour marketUnemployment 2.1% N.A.10.110.511.111.111.010.710.810.5::::Employment 2.2Ann. % chN.A.N.A.2.52.23.53.13.14.35.4::::Wages 2.3Ann. % ch12.414.214.918.412.49.48.39.412.7::::3  External sectorExports of goods 3.1Ann. % ch0.03.5-9.0-0.710.2::11.410.1:7.58.9:Imports of goods 3.2Ann. % ch7.3-4.0-14.8-3.817.2::23.223.5:37.119.6:Trade balance* 3.3% of GDP-8.4-6.8-5.6-4.8-6.9-8.2-8.4-6.0-6.9:N.A.N.A.N.A.Exports goods and services 3.4% of GDP22.323.823.322.024.8::24.424.8:N.A.N.A.N.A.Imports goods and services 3.5% of GDP28.127.626.024.929.3::28.129.3:N.A.N.A.N.A.Current account balance* 3.6% of GDP-7.8-4.7-3.8-3.8-5.5-4.2-4.4-4.7-5.5:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP1.41.42.11.61.3::1.41.3:N.A.N.A.N.A. International reserves 3.8bio EUR130.3128.3110.5106.1107.7::111.9107.7110.0116.1114.4110.0 Int. reserves / months Imp 3.9Ratio6.26.46.46.45.5::6.15.5:5.85.7:4  Monetary developmentsCPI 4.1Ann. % ch7.58.97.77.811.18.57.410.612.310.310.310.310.2Producer prices 4.2Ann. % ch4.510.25.34.315.8::16.016.713.412.113.714.3Food prices 4.3Ann. % ch9.112.611.15.812.7::11.514.19.88.810.310.4M4 4.4Ann. % ch19.016.017.812.717.7::18.217.915.714.315.817.0Exchange rate TRY/EUR 4.5Value2.572.903.033.344.15::4.164.544.764.684.664.92Nominal eff. exchange rate 4.6Index78.8769.4064.2059.1048.22::48.7444.94:43.9743.59:5  Financial indicatorsInterest rate (3 months) 5.1% p.a.6.609.8410.489.8812.20::12.4813.2413.5013.9213.2913.30Interest rate, long term  5.2% p.a.7.779.189.3010.1911.11::10.7211.97:11.9011.92:Stock markets 5.3Index77 97775 19080 64177 17798 993::106 411107 829116 573116 792116 249116 679Credit growth 5.4Ann. % ch34.718.420.416.221.2::23.521.219.718.219.419.7Deposit growth 5.5Ann. % ch24.111.618.617.717.7::21.517.718.115.116.718.1Non-performing loans 5.6% total2.82.82.93.23.1::3.12.92.92.92.92.96  Fiscal developmentsGeneral government balance 6.1% of GDP0.10.11.3-0.9-2.4f-1.8-2.6-0.3-0.8:N.A.N.A.N.A.General government debt 6.2% of GDP31.328.627.526.428.2f27.928.0:::N.A.N.A.N.A.f: ECFIN forecast Autumn 2017 published November 2017* Q figures refer to a 4 quarters moving average.TURKEYECFIN 2017Autumn forecast 
CHARTS 

28 

European Commission, ECFIN-D-1TURKEYJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12-202468101220142015201620172018GDP growth% year-on-year6789101112131420142015201620172018Unemployment% of labour force4-quarters moving average-8-7-6-5-4-3-2-1020142015201620172018Current account balanceAnnual moving average, % of GDP5678910111213141520142015201620172018InflationCPI, % year-on-year0.11.3-0.9#N/A#N/A-2-1.5-1-0.500.511.5220142015201620172018General government balance% of GDPSource:AMECO901001101201301401501601.001.502.002.503.003.504.004.505.0020142015201620172018Exchange ratesLhs: Nom. TRY/EURRhs: REERIndex 2003=100Note: New Turkish Lira introduced on 01.01.2005(1 new TL =  1,000,000 TRL) 
BOSNIA AND HERZEGOVINA 

Key developments 

On  9  February,  the  IMF  completed  the  first 
review  of  the  Extended  Fund  Facility  and 
approved  the  disbursement  of  another  tranche 
(€75  million,  0.5%  of  GDP).  Overall,  the  IMF 
noted  progress  in  achieving  program  objectives 
and  targets.  While  the  implementation  of  some 
key  policies  has  been  slower  than  envisaged  at 
the time of program request, the authorities have 
made  notable  progress  in  maintaining  fiscal 
discipline,  safeguarding  financial  stability,  and 
improving the business environment.  

On 2 March, the BiH authorities submitted their 
2018-2020 Economic Reform Programme to the 
Commission.  It  envisages  economic  growth  to 
pick up moderately, from expected 3.4% in 2018 
to  3.9%  in  2020,  mainly  driven  by  investment 
and  private  consumption,  which  is  benefitting 
from  rising  employment  and  low  inflation.  The 
general  government  surplus  is  expected  to 
increase further, reaching 1.8% of GDP in 2020, 
mainly  due  to  a  strong  decline  in  public 
spending.  The  realisation  of 
this  scenario 
depends on a clear improvement in the country’s 
investment  climate,  improved  governance  and 
policy commitment. 

On  17  April, 
the  European  Commission 
presented  its  annual  enlargement  package.  It 
stated  that  as  regards  the  economic  criteria  for 
EU  membership,  Bosnia  and  Herzegovina  has 
made some progress, but is still at an early stage 
in  establishing  a  functioning  market  economy. 
Furthermore,  with  respect 
to  coping  with 
competitive  pressure  and  market  forces  within 
the Union, the country has  made some progress 
but has also remained at an early stage. 

Real sector 

According 
to  preliminary  expenditure  data, 
output  expanded  by  1.6%  in  2017,  after  3.3% 
and  3.8%  in  2016  and  2015.  The  main  drivers 
were  exports  and  private  consumption,  while 
investment  was  2.8%  lower  than  in  2016. 
However,  production  side  data  points  to  a 
significantly  stronger  growth  of  3%  in  2017,  a 
similar  increase  as  in  the  two  previous  years. 
Wholesale  trade  and  manufacturing  were  the 
main  sources  of  growth,  accounting  for  two 
thirds  of  the  country's  annual  growth,  while 
agriculture  and  forestry  reduced  overall  growth 
by 0.3 percentage points.  

High-frequency  indicators,  such  as  industrial 
production  or  retail  sales, point  so solid  growth 
in  January,  increasing  by  8.4%  and  15.6%, 
respectively,  but  to  a  slowdown  in  February, 
declining to 3.6% and 4.2%, respectively.   

Labour market 

in 

increase 

registered 

tourism.  The  number  of 

The 
employment 
accelerated  in  the  fourth  quarter,  to  3.9%  year-
on-year,  compared  to  2.7%  in  the  third  quarter. 
This  brought  the  annual  increase  in  registered 
employment to 3.5%, compared to 2.1% during 
2016.  The  main  sectors  with  employment 
growth  were  manufacturing,  construction,  but 
registered 
also 
unemployed  has  continued 
In 
January,  it  was  lower  by  7%  y-o-y,  which 
reflects 36 thousand registered unemployed less 
than  a  year  before.  The  administrative 
unemployment rate dropped by three percentage 
points  during  the  last  year  (from  40.6%  in 
January  2016  to  a  still  worrying  37.5%  in 
January  2017).  Youth  unemployment  remains 
above 60%.  

to  decline. 

Nominal wages rose by 1.5% year-on-year in the 
fourth  quarter, 
largely  unchanged  when 
compared  to  the  third  quarter.  In  January, 
nominal  wages  were  3%  higher  than  a  year 
before.  When  taking  into  account  consumer 
price  inflation,  real  wages  in  the  fourth  quarter 
of  2017  were  about  1.7%  higher  than  a  year 
before.  

External sector 

The  current  account  deficit  deteriorated  in  the 
fourth quarter, with its 4-quarter moving average 
increasing to around 4.7% of GDP, compared to 
4.3%  in  the  four  quarters  to  September  2017. 
Commodity  exports  increased  by  9%  year-on-
year  in  the  fourth  quarter,  but  growth  of 
commodity imports was even stronger, at 9.9%. 

In  the  whole  year  of  2017,  the  value  of  goods 
exports rose by 16.8% in 2017, compared to 7% 
the  year  before.  This  strong  acceleration  was 
largely  due  to  higher  exports  to  neighbouring 
countries,  in  particular  Serbia  and  Croatia, 
contributing  nearly  one  third  to  overall  export 
growth. Trade  to  the  EU,  including  Croatia and 
Slovenia, contributed nearly 9 percentage points 
to  the  nominal  increase,  while  trade  to  the 

29 

 
 
 
 
 
 
 
 
Western  Balkan  countries  contributed  about  3 
percentage  points  to  the  overall  growth  rate. 
Merchandise  imports  increased  by  +11.9%  in 
2017.  

FDI  inflows  accounted  for  about  2.1%  of  GDP 
(4-quarter  moving  average)  by  end-2017, 
compared  to  1.5%  of  GDP  the  year  before.  In 
the  first  three  quarters  of  2017,  the  main 
countries  of  origin  for  FDI  were  Switzerland, 
Slovenia  and  Saudi  Arabia.  Foreign  reserves 
remained  largely  unchanged  in  terms  of  import 
coverage, at slightly above 7 months.  

Monetary developments 

Inflation remained largely unchanged during the 
fourth  quarter,  accounting  for  1.3%  year-on-
year, compared to 1.2% in the third quarter, to a 
large  extent  driven  by  higher  prices  for  food, 
alcoholic  beverages  and  housing.  However, 
inflationary pressures subsided again in January 
and  February,  partly  due  to  lower  prices  for 
clothing. For the whole year of 2017, the annual 
average  increase  in  the  consumer  price  index 
was 1.2%, compared to a year-on-year decline in 
the price level by 1.1% in 2016.  

The  annual  growth  of  the  monetary  aggregate 
M2 remained high in the fourth quarter, at 9.9% 
compared  to  9.8%  in  the  second  quarter.  This 
largely reflects strong growth in deposits. 

Financial sector 

loans 

Annual domestic credit growth remained strong 
at  6.7%  in  the  fourth  quarter,  with  similar 
increases  in  January  and  February.  Household 
and corporate credits, accounting in nearly equal 
shares for about 90% of total loans, continued to 
be  the  main  driving  force  behind  this  trend. 
Household 
rose  by  6.6%  y/y  and 
accelerated  to  7%  in  January  and  February, 
compared to 6.7% in July-September. Corporate 
credits  increased  slightly  faster,  by  8.2%  in  the 
fourth  and  by  8.0%  and  8.2%  in  January  and 
February, respectively, compared to 7.9% in the 
third  quarter.  Loans  to  entities,  cantons  and 
municipalities, which account for around 5% of 
total  credits,  were  largely  unchanged  in  the 
fourth  quarter,  as  slight  reductions  in  October 
and  November  (by  some  1%)  were  largely 
compensated  by  an 
in 
December.  In  January  and  February,  overall 
lending  to  the  public  sector  remained  largely  at 
the same level as a year before.  

increase  by  2.4% 

Growth of total deposits continued to strengthen 
in  the  fourth  quarter,  reaching  11.4%  year-on-
year,  compared  to  10.6%  in  July-September.  In 

January  and  February,  deposit  growth remained 
strong,  at  11.2%.  As  a  result  of  the  robust 
increase  in  deposits,  the  loan-to-deposit  ratio 
continued to be below the 100% mark (at 92.5% 
in February), compared to 96.4% a year before. 

improved,  with 

The share of non-performing loans in total loans 
continued  to  decline  slightly,  to  10%  in  the 
fourth quarter, compared to 11.8% a year before. 
At  the  same  time,  loan-loss  provisioning  has 
the  coverage  ratio 
further 
climbing  to  77.8  in  the  fourth  quarter,  from 
75.8%  in  the  fourth  quarter  of  2016.  Banking 
sector profitability has continued to drop slightly 
as the return on equity fell to 10.3% in the fourth 
quarter  from  11.7%  in  the  third  quarter.  The 
return  on  average  assets  dropped  to  1.5%.  The 
banking  system's  overall  capital  adequacy  ratio 
remained  largely  unchanged,  at  15.7%  in  the 
fourth quarter, compared to 15.8% a year before. 
This  overall level is  clearly  above  the  country's 
regulatory minimum of 12%. However, there are 
big differences among the various banks. 

Fiscal developments 

According  to  preliminary  data,  public  sector 
revenues  performed  well  in  the  first  three 
quarters of 2017, increasing by 8% year-on-year. 
The main driver of this growth was tax revenue, 
accounting  for  about  two  thirds  of  the  overall 
increase.  Public  spending  during  the  first  nine 
months was only 2% higher  than a year before. 
However, there seems to have been a significant 
acceleration  in  spending  in  the  third  quarter,  in 
particular  in  the  areas  of  grants,  subsidies  and 
spending  for  public  goods  and  services,  while 
spending  on  public  wages  has 
remained 
contained.  There  is  no  reliable  data  on  public 
investment  available  yet.  However,  anecdotal 
evidence  suggests  lower  than  planned  spending 
on investment, partly due to political stalemates 
and  the  resulting  delays  in  securing  financing 
and implementation. This would suggest that the 
general  government  accounts  might  have  again 
registered  a  slight  surplus  in  2017,  as  in  the 
previous two years.  

The latest available public debt data points to a 
drop  in  the  debt-to-GDP  ratio,  to  some  36%  at 
the end of 2017 compared to 40% a year earlier. 
The  currency  composition  remained  largely 
the  debt  was 
unchanged:  about  15%  of 
denominated 
the 
currency, 
domestic 
remaining  85%  in  foreign  currency.  The  three 
largest  holders  of  foreign  debt  are  the  World 
Bank, the European Investment Bank (EIB) and 
the EBRD, accounting for about 23%, 22% and 
10%  of  the  country's  total  foreign  public  debt, 
respectively. 

in 

30 

 
 
 
 
 
 
TABLE 

31 

European Commission, ECFIN-D-1BOSNIA AND HERZEGOVINA20132014201520162017Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1BalanceN.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Industrial production 1.2Ann. % ch5.20.23.14.43.15.52.7:8.43.6:Gross domestic product 1.3Ann. % ch2.60.23.83.31.61.83.0:N.A.N.A.N.A.Private consumption 1.4Ann. % ch2.72.71.31.3:2.0::N.A.N.A.N.A.Gross fixed capital formation 1.5Ann. % ch-1.211.5-3.52.5::::N.A.N.A.N.A.Construction index 1.6Ann. % ch-25.822.2-22.734.0-6.93.5-6.9:N.A.N.A.N.A.Retail sales 1.7Ann. % ch4.61.87.87.05.14.44.7:15.64.2:2  Labour marketUnemployment 2.1% 27.527.527.725.420.5N.A.N.A.N.A.N.A.N.A.N.A.Employment 2.2Ann. % ch1.0-1.21.2-2.61.8N.A.N.A.N.A.N.A.N.A.N.A.Wages 2.3Ann. % ch0.1-0.10.00.91.61.61.5:3.0::3  External sectorExports of goods 3.1Ann. % ch9.53.05.17.016.823.19.0:25.510.9:Imports of goods 3.2Ann. % ch-0.77.1-2.32.411.914.09.9:24.21.3:Trade balance* 3.3% of GDP-25.0-27.8-24.2-22.7-23.5-23.1-23.5:N.A.N.A.N.A.Exports goods and services 3.4% of GDP31.832.833.534.338.237.838.2:N.A.N.A.N.A.Imports goods and services 3.5% of GDP51.154.751.450.454.753.954.7:N.A.N.A.N.A.Current account balance* 3.6% of GDP-5.0-7.1-5.2-4.7-4.7-4.3-4.7:N.A.N.A.N.A.Direct investment (FDI, net)* 3.7% of GDP1.22.81.61.52.12.22.1:N.A.N.A.N.A. International reserves 3.8mio EUR3 574.14 118.44 290.64 928.35 376.55 302.65 376.5:5 259.95 551.0: Int. reserves / months Imp 3.9Ratio5.55.96.37.27.0-19.6-20.0:6.87.1:4  Monetary developmentsCPI 4.1Ann. % ch-0.1-0.9-1.0-1.11.21.11.3:0.30.9:Producer prices 4.2Ann. % ch-2.2-0.2-0.6-0.91.80.72.9:2.42.0:Food prices 4.3Ann. % ch0.0-2.7-0.9-1.10.91.21.8::::M2 4.4Ann. % ch5.77.58.07.89.89.89.9:9.49.0:Exchange rate BAM/EUR 4.5Value1.961.961.961.961.961.961.961.961.961.961.96Nominal eff. exchange rate 4.6Index103.6104.99103.92105.22106.04106.25106.71::::5  Financial indicatorsInterest rate (3 months) 5.1% p.a.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Bond yield  5.2% p.a.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Stock markets 5.3Index770707701692627625613610583607639Credit growth 5.4Ann. % ch2.73.71.82.15.36.46.7:6.96.8:Deposit growth 5.5Ann. % ch5.18.46.27.710.410.611.4:11.211.2:Non performing loans 5.6% total14.515.213.912.310.910.810.0:N.A.N.A.N.A.6  Fiscal developmentsGeneral government balance 6.1% of GDP-2.0-2.00.61.2::::N.A.N.A.N.A.General government debt* 6.2% of GDP35.540.140.439.1::::N.A.N.A.N.A.* Q figures refer to a 4 quarters moving average and refers only to foreign public debt. 
 
CHARTS 

32 

European Commission, ECFIN-D-1BOSNIA AND HERZEGOVINAJun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12-6-4-202468101220142015201620172018GDP growth% year-on-year20222426283020142015201620172018Unemployment% of labour force LFS-8-7-6-5-4-3-2-1020142015201620172018Current account balanceAnnual movingaverage, % GDP-3-2-1012320142015201620172018InflationCPI, % year-on-year-2.00.61.2#N/A-3-2-101220142015201620172018General government balance% of GDP90951001051101.501.752.002.252.5020142015201620172018Exchange rate Lhs: Nom. BAM/EUR Rhs: REERIndex 2002=100 
 
 
 
KOSOVO 

Key developments 

submitted 

January,  Kosovo 

In 
its  2018 
Economic  Reform  Programme  (ERP)  to  the 
Commission,  covering  2018-2020.  It  projects  a 
more  optimistic  growth  outlook  than  in  the 
previous  year  with  GDP  growth  strengthening 
from  4.1%  in  2016  to  5.1%  in  2020.  Private 
consumption  is  set  to  be  the  key  driver  of 
growth.  Further  impetus  is  expected  from  large 
infrastructure investment which will be financed 
by  the  IFIs  and  privatisation  proceedings.  The 
to 
ERP  underlines  Kosovo's  commitment 
sustainable public finance. The budget deficit, as 
calculated according to the fiscal rule is planned 
to  stay  below  the  2%  of  GDP  threshold. 
Government debt is forecast to increase to a still 
moderate level of 17.6% of GDP in 2018. 

In  March,  Kosovo's  Parliament  ratified  a  2015 
border  agreement  with  Montenegro,  fulfilling  a 
key  condition  for  the  country  to  gain  visa-free 
travel to the European Union. 

the  European  Commission 
In  mid-April, 
presented  its  annual  enlargement  package.  It 
stated  that  as  regards  the  economic  criteria  for 
EU membership, Kosovo is still an early stage of 
preparedness,  but  has  made  a  good  progress 
towards  developing  a 
functioning  market 
economy.  Kosovo  has  made  some  progress 
and is at an early stage in terms of capacity 
to  cope  with  competitive  pressure  and 
market forces within the EU. 

Real sector  

In  the  last  quarter  of  2017  economic  growth 
decelerated to 3.2% y-o-y from 4.4% in the third 
quarter. Based on quarterly data for 2017, annual 
GDP  growth  was  recorded  at  3.74%.  Mainly 
driven  by  public  works,  gross  fixed  capital 
formation  increased  by  10.7%  y-o-y  in  2017, 
providing  the  largest  contribution  to  growth. 
Government 
consumption 
decreased  by  0.7%  y-o-y  and  1.3%  y-o-y, 
respectively,  on  the  back  of  the  prolonged 
formation  of  a  new  government  and  related 
political  uncertainty,  which 
impacted  on 
consumer confidence. Net exports of goods and 
services provided a positive contribution to GDP 
growth  (2.5p.p.)  owning  to  an  increase  in 

household 

and 

from 

the  global 

exports (5.3% y-o-y) which has outpaced import 
growth  (2.8%  y-o-y).  Kosovo's  exports  are 
dominated  by  minerals  and  base  metals  which 
benefited 
recovery  of 
commodity  prices.  In  2017  gross  value  added 
grew  by  3.6%  y-o-y  and  was  driven  by  the 
mining,  and  accommodation  sectors  (increases 
of  26.5%  and  19.7%  y-o-y,  respectively)  with 
the 
small 
transportation,  construction  and  trade  sectors. 
Financial  activities  and  other  services  recorded 
small negative growth contributions.  

contributions 

positive 

from 

In the fourth quarter of 2017, industrial turnover 
increased by an estimated 6.5% y-o-y. Turnover 
in the mining sector rose by 31.3% y-o-y and in 
the  manufacturing  sector  by  3.2%  y-o-y. 
Productivity  per  employee  increased  in  both 
sectors  as  higher  turnover  was  achieved  with 
smaller number of employees as compared to the 
previous quarter. 

Labour market  

According to the labour force survey, the labour 
market exhibited a mixed performance in 2017. 
In  the  last  quarter  of  2017  the  labour  force 
participation rate stood at 42.9%, growing by 4.2 
percentage points y-o-y. The unemployment rate 
in the fourth quarter increased to 30.6% from the 
28.7%  in  the  same  quarter  in  2016.  The 
employment  rate  grew  to  29.8%  from  29.5% 
over  the  same  period,  which  represents  a  very 
marginal  improvement.  The  youth  jobless  rate 
(15-24 years) increased to a staggering 55.9% in 
Q4 from 53.3% in Q3. Labour market outcomes 
are  especially  poor  for  women,  as  only  one  in 
five  women  of  working  age  are  active  in  the 
labour market and only one in six is employed. 

External sector  

In  2017,  the  current  account  deficit  narrowed 
substantially  to  5.9%  of  GDP  from  8.3%  in 
2016. The goods and services deficit declined to 
26.3% of GDP from 28.6% in the previous year, 
due  to  recovering  prices  of  base  metals  and 
strong  service  exports.  In  line  with  stronger 
growth in the EU, worker remittances increased, 
accounting for 11.2% of GDP. On the financing 
side,  net  inflows  of  FDI  edged  up  to  3.9%  of 
GDP  from  2.9%  in  the  previous  year.  Portfolio 
investments  recorded  a  net  outflow  of  0.2%  of 

33 

 
 
 
 
 
 
 
 
 
 
 
GDP.  The  traditionally  high  net  errors  and 
omissions  decreased  substantially  from  6%  to 
1%  of  GDP,  still  indicating  non-recorded 
capital inflows. 

in  January 
Following  strong  performance 
turned 
(14.3%  y/y)  goods  export  growth 
negative in February (-5.5% y/y) as compared to 
the  corresponding  month 
in  2017.  This 
development  was  driven  by  lower  exports  of 
foodstuffs and mineral products while exports of 
base  metals,  plastic  and  rubber  articles  have 
increased.  In  the  first two  months  of  2018  total 
goods exports expanded on average by 3.9% y-
o-y while total imports of goods rose by 16.1% 
y-o-y,  with  base  metals,  machinery  and  electric 
materials being the main import drivers. During 
January-February  the  overall  merchandise  trade 
deficit increased by 17.9% y-o-y. 

Monetary developments 

Kosovo's  inflation  rate  is  heavily  influenced  by 
price developments in the main trading partners, 
namely the EU. In 2017, the annual average CPI 
inflation  was  1.5%  y-o-y  with  the  largest 
positive  contribution  coming  from  rising  food 
prices.  In  the  first  three  months  of  2018 
consumer  prices  were  on  average  stable.  Core 
inflation  accelerated  from  0%  y-o-y  in  January 
in  March  while  negative 
to  0.4%  y-o-y 
contribution came from declining energy prices, 
which subtracted 0.4pps in each month.  

index 
The  annual  average  producer  price 
increased  by  3.4%  y-o-y,  and  the  construction 
cost  index  grew  by  1.8%  y-o-y  in  2017.  Their 
increases  result  from  energy,  construction  and 
electrical  materials  price  rises.  Average  annual 
increase  of  import  prices  stood  at  4%  in  2017 
due  to  increases  in food  as  well  as  mineral  and 
metal products prices. 

Financial sector 

Strong  credit  growth  (10.5%  on  average  in 
2017)  has  continued  in  the  first  two  months  of 
2018  (11.3%  y-o-y).  Loans  to  households  have 
increased  by  nearly  13%  y-o-y  in  the  first  two 
months while loans to firms were slightly behind 
with  a  growth  rate  of  10.8%  y-o-y.  The  credit 
expansion was supported by lower interest rate, 
better  project  preparation  by  enterprises  and 
collateral insurance for SME loans by Kosovo's 
Credit Guaranteeing fund. 

Total  deposits  growth  in  commercial  banks 
slowed  down  to  6.9%  y-o-y  on  average  in 
January-February as compared to 8.5% over the 

same months in 2017. The loans to deposit ratio 
rose to nearly 80% in February, from 77% a year 
ago,  suggesting  a  continuous  increase,  but  still 
substantial room for stronger banking activity.   

After  a  small  spike  to  7.1%  in  January,  the 
average lending rate for new loans stood at 6.9% 
in  February.  This  is  slightly  above  the  annual 
average  of  6.83%  for  2017,  suggesting  a 
possible reverse of a downward trajectory in the 
previous  year  when  the  lending  rate  declined 
from 7.7% in January to 6.8% in December. 

Financial  soundness  indicators  in  the  banking 
sector remained satisfactory throughout the first 
two months of 2018. For the banking system as 
a  whole,  the  ratio  of  liquid  assets  to  short-term 
liabilities  stood  at  38%  in  February  2018, 
compared to 37% at the end of 2017. The capital 
adequacy  ratio  was  17.9%,  well  above  the 
regulatory  minimum  of  12%.  The  already  low 
NPL  ratio  decreased  further  to  3.1%  as  the 
Central  Bank  continued  to  implement  stricter 
write-off  standards.  Existing  NPLs  are  fully 
covered by loan loss provisions (154.3%). 

Fiscal developments 

According  to  preliminary  2017  budget  outcome 
figures,  as  presented  in  the  country's  Economic 
Reform Programme, the budget deficit was 0.7% 
of  GDP  in  2017,  well  below  the  limit  of  2% 
defined  by  the  fiscal  rule.  Total  government 
revenues  grew  by  staggering  5.3%, on the  back 
improved  collection  of  VAT  revenues 
of 
following  stronger  imports  and  higher  income 
from  custom  duties 
in  2016.  Total 
expenditure rose by 4.9% year-on-year. Current 
expenditure grew by 4.8%, mainly due to limited 
growth  of  the  wage  bill.  On  the  other  hand, 
capital  spending  increased  by  5.4%  y-o-y,  thus 
maintaining  its  share  in  total  spending  largely 
unchanged  at  26.9%.  Overall  execution  of  the 
capital budget was around 90%.  

than 

the  former  Yugoslavia,  which 

At  the  end  of  2017  total  public  debt  with 
guarantees reached 16.6% of GDP, not including 
Kosovo's  share  of  the  London  and  Paris  club 
debt  of 
is 
currently  estimated  at  around  5%  of  GDP.  The 
government  has  continued  issuing  domestic 
debt,  which  now  amounts  to  55.9%  of  overall 
public  debt,  with  a  continuously  falling  yield. 
Weighted  average  interest  rate  declined  from 
2.09% in 2016 to 1.86% in late 2017. In contrast 
average  maturity  of  domestic  debt  has  been 
gradually  increasing  from  4.8  to  5.4  years  over 
the same period. 

34 

 
 
 
 
 
 
TABLE 

35 

European Commission, ECFIN-D-1KOSOVO*20132014201520162017Q3 17Q4 17Q1 18Jan 18Feb 18Mar 181  Real sectorIndustrial confidence 1.1BalanceN.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Industrial production 1.2Ann. % ch3.20.01.3-1.3:10.5:::::Gross domestic product 1.3Ann. % ch3.41.24.14.13.74.43.2:N.A.N.A.N.A.Private consumption 1.4Ann. % ch2.04.93.84.8-1.5-7.60.1:N.A.N.A.N.A.Investment 1.5Ann. % ch-0.3-5.011.37.510.98.84.0:N.A.N.A.N.A.Construction index 1.6Ann. % chN.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Retail sales 1.7Ann. % chN.A.11.67.16.512.011.86.8:N.A.N.A.N.A.2  Labour marketUnemployment 2.1% 30.035.332.927.5::::N.A.N.A.N.A.Employment 2.2Ann. % ch11.8-4.4-8.211.8::::N.A.N.A.N.A.Wages 2.3Ann. % chN.A.N.A.5.8:::::N.A.N.A.N.A.3  External sectorExports of goods 3.1Ann. % ch6.410.40.2-4.822.142.911.8:14.3-5.5:Imports of goods 3.2Ann. % ch-2.33.63.85.99.210.311.0:32.83.7:Trade balance** 3.3% of GDP-40.5-39.8-39.8-40.9-41.8-42.9-44.2:N.A.N.A.N.A.Exports goods and services** 3.4% of GDP21.922.521.922.226.526.828.1:N.A.N.A.N.A.Imports goods and services** 3.5% of GDP49.651.250.450.852.954.156.0:N.A.N.A.N.A.Current account balance**  3.6% of GDP-3.4-6.9-8.6-8.3-5.9-6.7-6.8:N.A.N.A.N.A.Direct investment (FDI, inflow)** 3.7% of GDP5.32.75.33.64.44.14.8:N.A.N.A.N.A. International reserves 3.8mio EUR1 504.31 266.41 302.61 161.71 242.71 345.61 242.7:1 313.71 292.5: Int. reserves / months Imp 3.9Ratio7.46.05.95.04.95.44.9:5.15.0:4  Monetary developmentsHICP 4.1Ann. % ch1.80.4-0.50.31.51.70.7:-0.20.0:Producer prices 4.2Ann. % ch2.41.62.7-0.10.60.41.6:N.A.N.A.N.A.Food prices 4.3Ann. % ch1.50.10.3-0.2:::::::Broad money liabilities 4.4Ann. % ch17.3-4.26.48.46.39.86.3:7.77.8:Exchange rate EUR/EUR4.5Value1.001.001.001.001.001.001.001.001.001.001.00Real eff. exchange rate (CPI) 4.6Index106.5106.7104.7N.A.:::::::5  Financial indicatorsInterest rate 5.1% p.a.11.8210.628.327.476.836.586.79:7.106.90:Bond yield  5.2% p.a.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Stock markets 5.3IndexN.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.N.A.Credit growth 5.4Ann. % ch3.63.46.99.110.59.911.1:11.411.1:Deposit growth 5.5Ann. % ch6.67.25.64.88.68.98.0:6.67.3:Non-performing loans 5.6% total8.78.36.24.9:::::::6  Fiscal developmentsGeneral government balance** 6.1% of GDP-3.1-2.2-2.0-1.2::::N.A.N.A.N.A.General government debt 6.2% of GDP8.910.713.114.616.6:::N.A.N.A.N.A.** Q figures refer to a 4 quarters moving average. 
 
CHARTS 

36 

European Commission, ECFIN-D-1KOSOVO*Jun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12012345620142015201620172018GDP growth% year-on-year35.332.927.5#N/A#N/A2527293133353720142015201620172018Unemployment% of labour force-6.9-8.6-8.3-5.9#N/A-12-10-8-6-4-2020142015201620172018Current account balance% of GDP-2-10123420142015201620172018InflationCPI, % year-on-year-2.2-2.0-1.2#N/A#N/A-4-3-2-1020142015201620172018General government balance% of GDP01220142015201620172018Exchange rate Lhs: Nom. EUR/EURIndex  
 
ALBANIA 

Explanatory notes 

No. 

Indicator 

1. 

Real sector 

Note 

Source 

1.1. 

Industrial confidence indicator 

Business Surveys, industry sector, industrial confidence Indicator, SA 

MacroBond 

1.2. 

Industrial production 

Annual percentage change, total, constant prices 

1.3. 

Gross domestic product 

Annual percentage change, volume. Annual data 

1.4. 

Private consumption 

Annual percentage change, constant prices, ALL, average prices of 
previous year 

1.5. 

Gross fixed capital formation 

Annual percentage change, constant prices, ALL, average prices of 
previous year 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

1.6. 

Construction index 

Annual percentage change, construction costs, total, 1999Q4=100 

MacroBond 

1.7. 

Retail sales 

Annual percentage change, total, 2005=100 

MacroBond 

2. 

Labour market 

2.1. 

Unemployment 

In percent of total labour force 

2.2. 

Employment 

Annual percentage change 

2.3. 

Wages 

Average monthly wages in State sector 

3. 

External sector 

3.1. 

Exports of goods 

Annual percentage change, mio. EUR. Break in series 2013. 

3.2. 

Imports of goods 

Annual percentage change, mio. EUR. Break in series 2013. 

3.3. 

Trade balance 

In percent of GDP 

3.4. 

Exports goods and services 

In percent of GDP. Annual data. Break in series 2013. 

3.5. 

Imports goods and services 

In percent of GDP. Annual data. Break in series 2013. 

3.6. 

Current account balance 

In percent of GDP, including official transfers 

3.7. 

Direct investment (FDI, net) 

In percent of GDP 

3.8. 

Reserves, International reserves 
of the National Bank 

Net foreign assets, total, mio EUR. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

3.9. 

Reserves / months Imp 

Ratio based on annual imports of goods and services. 

ECFIN 

4. 

Monetary developments 

4.1. 

Interim CPI 

Consumer Prices, All items, Total. Annual percentage change 

MacroBond 

4.2. 

Producer prices 

Annual percentage change, Total, index (1998) 

4.3. 

Food prices 

Annual percentage change, Food and Non-alcoholic Beverages, Total, 
December 2007=100 

Up to 2007 Dec2001 = 100, 2007 onwards Dec2007 = 100. 

4.4. 

M2 

Annual percentage change 

4.5. 

Exchange rate LEK/EUR 

Period averages 

4.6. 

Change real eff. exchange rate 

Not available 

5. 

Financial indicators 

5.1. 

Interest rate 

Treasury Bills, 3 Month Auction, Yield 

5.2. 

Bond yield 

Government Benchmarks, 3 Year Bond, Yield 

5.3. 

Stock markets 

Not available 

5.4. 

Credit growth 

Annual percentage change, total 

5.5. 

Deposit growth 

Annual percentage change, total 

5.6. 

Non-performing loans 

Credit Portofolio Quality, NPLs % 

6. 

Fiscal developments 

6.1. 

General government balance 

In percent of GDP, Q/Q GDP 

6.2. 

General government debt 

In percent of GDP  

37 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

ECFIN 

ECFIN 

 
 
 
 
 
 
 
 
 
 
 
THE FORMER YUGOSLAV 
REPUBLIC OF 
MACEDONIA 

Explanatory 
notes 

No. 

Indicator 

1. 

Real sector 

Note 

Source 

1.1. 

Industrial confidence indicator 

Current Situation, Assessment, Enterprises, total, MKD 

1.2. 

Industrial production 

Annual percentage change, volume, excluding construction 

MacroBond 

MacroBond 

1.3. 

Gross domestic product 

Real Gross Domestic Product, Total, Growth Rate (2005), NSA. 

MacroBond 

1.4. 

Private consumption 

Real Final Consumption, Households including NPISH's, Growth Rate 
(2005), NSA. 

1.5. 

Gross fixed capital formation 

Real Gross Capital Formation, Growth Rate (2005), NSA. 

1.6. 

Construction 

Value Added, Economic Activity, Current Prices, MKD 

MacroBond 

MacroBond 

MacroBond 

1.7. 

Retail sales 

2. 

Labour market 

Annual percentage change, Retail trade, turnover, total. Starting 2012  
Retail Sale of Non-Food Products except Fuel (2010), NSA. 

MacroBond 

2.1. 

Unemployment 

In percent of total labour force, Labour Force Survey  

2.2. 

Employment 

Annual percentage change, Labour Force Survey  

2.3. 

Wages 

3. 

External sector 

Annual percentage change; average gross wages (nominal amount in 
Denar) 

3.1. 

Exports of goods 

Annual percentage change, fob 

3.2. 

Imports of goods 

Annual percentage change, cif 

3.3. 

Trade balance 

In percent of GDP, fob-cif 

3.4. 

Exports goods and services 

In percent of GDP, volume  

3.5. 

Imports goods and services 

In percent of GDP, volume  

3.6. 

Current account balance 

In percent of GDP, rolling four quarter for quarterly data 

3.7. 

Direct investment (FDI, net) 

In percent of GDP, annualised data 

3.8. 

Reserves, International reserves 
of the National Bank 

 Foreign assets, mio EUR. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

SSO 

SSO 

MacroBond 

MacroBond 

MacroBond 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average. 

MacroBond 

4. 

Monetary developments 

4.1. 

CPI 

Annual average percentage change, HICP not yet available for fYRoM 

MacroBond 

4.2. 

Producer prices 

Annual percentage change, industrial products 

4.3. 

Food prices 

Annual percentage change, food and non alcoholic beverages 

4.4. 

M4 

Annual percentage change, M4 (Broadest money) 

4.5. 

Exchange rate MKD/EUR 

Averages, spot close 

4.6. 

Nominal eff. exchange rate 

Nominal Effective Exchange Rate, MKD, Index 2005=100 

5. 

Financial indicators 

5.1. 

Interest rate 

Interest rate Denar deposits 

5.2. 

Bond yield 

Not available 

5.3. 

Stock markets 

MSE Index (MBI-10) 

5.4. 

Credit growth 

Annual percentage change, domestic credit, DMB, total, overall, with 
Saving houses, MKD 

5.5. 

Deposit growth 

Annual percentage change, with Saving houses, total,  MKD 

5.6. 

Non-performing loans 

In percent of total 

6. 

Fiscal developments 

6.1. 

Central government balance 

In percent of GDP, Q/Q GDP 

6.2. 

Central government debt 

In percent of GDP  

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MoF 

MoF 

38 

 
 
 
 
 
 
 
 
 
MONTENEGRO 

Explanatory 
notes 

No. 

Indicator 

1. 

Real sector 

Note 

Source 

1.1. 

Industrial confidence indicator 

Surveys, EC Industry Survey, Industrial Confidence Indicator, NSA 

MacroBond 

1.2. 

Industrial production 

Annual percentage change 

1.3. 

Gross domestic product 

Annual percentage change, annual data, chain index. ESA2010 from 
2011 onwards, before ESA95. 

1.4. 

Private consumption 

Annual percentage change, annual data, chain index 

1.5. 

Gross fixed capital formation 

Annual percentage change, annual data, chain index 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

1.6. 

Construction index 

Annual percentage change, value of performed work, current prices 

MacroBond 

1.7. 

Retail sales 

Annual percentage change, turnover, total 

MacroBond 

2. 

Labour market 

2.1. 

Unemployment 

In percent of active population, e.o.p. 

2.2. 

Employment 

Annual percentage change of registered employment, avrg. 

MacroBond 

MacroBond 

2.3. 

Wages 

Annual percentage change, average gross wages (nominal, in EUR) 

MacroBond 

3. 

External sector 

3.1. 

Exports of goods 

Annual percentage change, thou. EUR 

3.2. 

Imports of goods 

Annual percentage change, thou. EUR 

3.3. 

Trade balance 

In percent of GDP, annualised data 

3.4. 

Exports goods and services 

Annual data 

3.5. 

Imports goods and services 

Annual data 

3.6. 

Current account balance 

In percent of GDP, annualised data 

3.7. 

Direct investment (FDI, net) 

In percent of GDP, annualised data 

3.8. 

Reserves, International reserves 
of the National Bank 

Claim on nonresidents, total, mio EUR. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average. 

MacroBond 

4. 

Monetary developments 

4.1. 

CPI 

Consumer price index (from Jan. 2008, cost-of-living index before), 
annual average percentage change, moving base year 

4.2. 

Producer prices 

Annual percentage change 

4.3. 

Food prices 

Annual percentage change, food and non-alcoholic beverages, total, 
CPPY=100 

MacroBond 

MacroBond 

MacroBond 

4.4. 

M21 

Annual percentage change, M21 (Broadest money) 

Discontinued 

4.5. 

Exchange rate EUR/EUR 

Use of the Euro since March 2002 

4.6. 

Nominal exchange rate 

Not available 

5. 

Financial indicators 

5.1. 

Interest rate 

Treasury Bills, 3 Month, auction, yield, average 

5.2. 

Bond yield 

Treasury Bills, 6 Month, auction, yield, average 

5.3. 

Stock markets 

MOSTE Index, Close 

5.4. 

Credit growth 

Annual percentage change, commercial banks, assets, loans 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

5.5. 

Deposit growth 

Annual percentage change, commercial banks, liabilities, deposits 

MacroBond 

5.6. 

Non-performing loans 

% of total 

6. 

Fiscal developments 

6.1. 

General government balance 

In percent of GDP, Q/Q GDP 

6.2. 

General government debt 

In percent of GDP  

39 

Central Bank ME 

Min. of Finance 

Min. of Finance 

 
 
 
 
 
 
 
 
 
 
 
 
 
SERBIA 

Explanatory notes 

Note 

Source 

No. 

Indicator 

1. 

Real sector 

1.1. 

Industrial confidence indicator 

Not available 

1.2. 

Industrial production 

Total, Index, CPPY=100 

1.3. 

Gross domestic product 

Annual percent change at constant (average) prices 2002 Production 
approach 

1.4. 

Private consumption 

Annual percent change , Real Individual Consumption Expenditure, 
Household Sector (ESA2010) (2010), NSA 

1.5. 

Gross fixed capital formation 

1.6. 

Construction index 

1.7. 

Retail sales 

2. 

Labour market 

2.1. 

Unemployment 

2.2. 

Employment 

Annual percent change, Real Gross Fixed Capital Formation (ESA2010) 
(2010), NSA 
Annual pc change, Value Index of Performed Works, Total CPPY=100, 
NSA 
Annual pc change, retail trade turnover, constant prices, CPPY=100 

In percent of total labour force, Labour Force Survey definition for 
annual data. Semi-annual data. 

Annual percentage change, as from 2014 based on LFS. Data before 
2014 are based on official data on registered employment. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond  

MacroBond 

2.3. 

Wages 

Gross wages annual percentage change; average growth rate, nominal 

MacroBond 

3. 

External sector 

3.1. 

Exports of goods 

Annual percentage change, mio. EUR, fob 

3.2. 

Imports of goods 

Annual percentage change, mio. EUR, cif 

3.3. 

Trade balance 

In percent of GDP, fob-cif, annualised data 

3.4. 

Exports goods and services 

In percent of GDP 

3.5. 

Imports goods and services 

In percent of GDP 

3.6. 

Current account balance 

In percent of GDP, annualised data 

3.7. 

Direct investment (FDI, net) 

In percent of GDP, annualised data 

3.8. 

International reserves NBS 

Total, mio EUR. 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average. 

4. 

Monetary developments 

4.1. 

CPI 

Consumer Prices, Total, CPPY, average. 

4.2. 

Producer prices 

Annual average percentage change, domestic market 

4.3. 

Food prices 

Annual pc, food and non-alcoholic beverages, CPPY=100 

4.4. 

M3 

Annual percentage change, M3 (broad money), RSD 

4.5. 

Exchange rate RSD/EUR 

Spot Rates, close, period average 

4.6. 

Nominal eff. exchange rate 

Period average, moving base year, RSD 

5. 

Financial indicators 

5.1. 

Interest rate 

Belgrade Overnight Index Average (BEONIA) 

5.2. 

Bond yield 

Weighted average interest rate on RS government bills. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

NBS 

5.3. 

Stock markets 

Belgrade Stock Exchange, BELEXfm index, price return, close, RSD 

MacroBond 

5.4. 

Credit growth 

5.5. 

Deposit growth 

Annual percentage change, monetary survey, domestic credit, total, RSD  MacroBond 
Annual percentage change, deposits, nonmonetary sector, total, RSD 

MacroBond 

5.6. 

Non-performing loans 

Gross Non-Performing Loan Ratio 

MacroBond 

6. 

Fiscal developments 

6.1. 

General government balance 

Consolidated GG, Overall balance. In percent of quarterly GDP, Q/Q GDP  Min. of Finance 

6.2. 

General government debt 

Central government debt. In percent of GDP 

Min. of Finance 

40 

 
 
 
 
 
 
 
 
 
 
 
TURKEY 

Explanatory notes 

No. 

Indicator 

1. 

Real sector 

Note 

Source 

1.1. 

Industrial confidence indicator 

Industry survey, confidence index real sector 

1.2. 

Industrial production 

Annual percentage change, volume (index 2010), excluding 
construction, calendar adjusted 

1.3. 

Gross domestic product 

Annual percentage change,  

1.4. 

Private consumption 

Annual percentage change, index (2009 prices) 

1.5. 

Gross fixed capital formation 

1.6. 

Construction index 

Annual percentage change, 
Annual percentage change, construction permits, buildings, total, TRY 

1.7. 

Retail sales 

Retail trade, annual percentage change, volume, 2015=100 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

2. 

Labour market 

2.1. 

Unemployment 

2.2. 

Employment 

2.3. 

Wages 

3. 

External sector 

In percent of total labour force, 15-64 age group, Labour Force Survey 
data 
Annual percentage change, 15-64 age group,  Labour Force Survey data  NSI 

NSI 

Annual percentage, Hourly earnings manufacturing / Index publication 
base - 

MacroBond 

3.1. 

Exports of goods 

Annual percentage change, mio. EUR, fob 

3.2. 

Imports of goods 

Annual percentage change, mio. EUR, cif 

3.3. 

Trade balance 

In percent of GDP, annualised moving average 

3.4. 

Exports goods and services 

In percent of GDP 

3.5. 

Imports goods and services 

In percent of GDP 

3.6. 

Current account balance 

In percent of GDP, annualised moving average 

3.7. 

Direct investment (FDI, net) 

In percent of GDP, annualised moving average of direct investment in 
reporting economy minus direct investment abroad 

3.8. 

Reserves, International reserves 
of the National Bank 

Gross international reserves, mio EUR, eop. 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average 

MacroBond 

4. 

Monetary developments 

4.1. 

CPI 

Annual percentage change, index 1994, Interim HICP is not available 

MacroBond 

4.2. 

Producer prices 

Annual percentage change, wholesale prices index (1994) 

MacroBond 

4.3. 

Food prices 

Annual pc, Food and Non-alcoholic Beverages, Total, TRY, 2003=100 

MacroBond 

4.4. 

M3 

Money supply M3, total, TRY 

4.5. 

Exchange rate YTL/EUR 

Period averages 

4.6. 

Nominal eff. exchange rate 

Index 1999, period averages 

5. 

Financial indicators 

5.1. 

Interest rate 

Deposit rates, 3 month, close 

5.2. 

Bond yield 

T-bond ISMA bid, 2 year, yield, close 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

5.3. 

Stock markets 

ISE index, trading volume (business), January 1986 = 1 Turkish Lira 

MacroBond 

5.4. 

Credit growth 

Annual percentage change, banking system, total loans, TRY 

MacroBond 

5.5. 

Deposit growth 

Annual percentage change, banking system, total deposits, TRY 

MacroBond 

5.6. 

Non-performing loans 

In percent of total lons 

6. 

Fiscal developments 

6.1. 

General government balance 

In percent of GDP, Q/Q GDP 

6.2. 

General government debt 

In percent of GDP, ESA 95 methodology 

MacroBond 

Nat. sources 

Nat. sources 

41 

 
 
 
 
 
 
 
 
 
 
BOSNIA AND HERZEGOVINA 

Explanatory 
notes 

No. 

Indicator 

1. 

Real sector 

1.1. 

Industrial confidence indicator 

Not available 

Note 

Source 

1.2. 

Industrial production 

Production, total, Index 2010=100, Annual percentage change 

1.3. 

Gross domestic product 

Annual percentage change 

1.4. 

Private consumption 

Annual percentage change,  Households, Total, Chain index 

1.5. 

Gross fixed capital formation 

Annual percentage change 

1.6. 

Construction index 

Annual percentage change, residential construction, completed dwellings 
m2, CPPY=100 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

1.7. 

Retail sales 

2. 

Labour market 

Total sale, index CPPY=100, weighted average Federation of Bosnia and 
Herzegovina 65% Serb Republic 35% 

MacroBond 

2.1. 

Unemployment 

Labour Force Survey, in percent of total labour force 

2.2. 

Employment 

Labour Force Survey, annual percentage change 

2.3. 

Wages 

Annual percentage change, average gross wages, BAM 

MacroBond,  

MacroBond 

MacroBond 

3. 

External sector 

3.1. 

Exports of goods 

Annual percentage change, mio. BAM, General merchandise, FOB 

MacroBond 

3.2. 

Imports of goods 

Annual percentage change, mio. BAM, General merchandise, FOB 

MacroBond 

3.3. 

Trade balance 

In percent of GDP, annualised data 

3.4. 

Exports goods and services 

In percent of GDP, estimated from Balance of Payments data 

3.5. 

Imports goods and services 

In percent of GDP, estimated from Balance of Payments data 

3.6. 

Current account balance 

In percent of GDP, annualised data 

3.7. 

Direct investment (FDI, net) 

In percent of GDP, annualised data 

3.8. 

Reserves, International reserves 
of the National Bank 

Gross foreign reserves, total, mio EUR 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average. 

MacroBond 

4. 

Monetary developments 

4.1. 

CPI 

All Items, with temporary reductions of prices, index CPPY=100 

MacroBond 

4.2. 

Producer prices 

Domestic, total, index CPPY=100 

MacroBond 

4.3. 

Food prices 

Annual pc change, food and non-alcoholic beverages, 2005=100, 

MacroBond 

4.4. 

M2 

Annual percentage change, M2 (broadest money) 

4.5. 

Exchange rate BAM/EUR 

Period averages, spot rates, close 

4.6. 

Nominal eff. exchange rate 

Index (2002 Apr=100); 9 Trade partners selected in order to set up the 
index (AT, FR, DE, HU, IT, SLO, HR, RS, CH) 

5. 

Financial indicators 

5.1. 

Interest rate 

5.2. 

Bond yield 

Not available 

Not available 

5.3. 

Stock markets 

SASX-10 Index, close 

5.4. 

Credit growth 

Annual percentage change, loans, total, BAM, End of period 

5.5. 

Deposit growth 

Annual percentage change, deposits, total, BAM, End of period 

5.6. 

Non-performing loans 

NPLs to total loans, BAM, End of period 

6. 

Fiscal developments 

6.1. 

General government balance 

In percent of GDP, consolidated budget, net lending, Q/Q GDP 

6.2. 

General government debt 

In percent of GDP, external public debt 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

MacroBond 

42 

 
 
 
 
 
 
 
 
 
 
 
 
 
KOSOVO  

Explanatory 
notes 

No. 

1. 

1.1. 

1.2. 

Indicator 

Real sector 

Industrial confidence indicator 

Not available. 

Industrial production 

Annual % ch 

1.3. 

Gross domestic product 

Annual percentage change. 

Private consumption 

Annual percentage change. 

Gross capital formation 

Annual percentage change. 

Construction index 

Not available. 

Note 

Source 

SOK, EC 
calculation 

Statistical Office 
of Kosovo (SOK) 

SOK 

SOK 

Wholesale Trade and Retail Sales, Retail Trade Turnover Value Index, 
Retail Sale in Non-Specialized Stores, 2013=100, NSA. 

MacroBond 

In percent of total labour force. 

SOK 

Annual pc change of number of employees, LFS 2012 onwards 

MacroBond 

Annual pc change, average monthly wages (Tax Register). 

SOK 

Retail sales 

Labour market 

Unemployment 

Employment 

Wages 

External sector 

Exports of goods 

Imports of goods 

Trade balance 

Annual percentage change. 

Annual percentage change. 

In percent of GDP. 

Exports goods and services 

In percent of GDP. 

Imports goods and services 

In percent of GDP. 

Current account balance 

In percent of GDP, Annual data. 

Direct investment (FDI, net) 

In percent of GDP, Annual data. 

Reserves, International reserves 
of the National Bank 

CBAK Survey, claims on nonresidents, mio EUR. 

3.9. 

Reserves / months Imp 

Ratio of 12 months imports of goods moving average. 

MacroBond 

Monetary developments 

Interim CPI 

Producer prices 

Food prices 

Annual average percentage change, index (May 2002 = 100) 

Annual percentage change, total, 2007=100 

Annual percentage change, food and non-alcoholic beverages, 
CPPY=100 

MacroBond 

MacroBond 

MacroBond 

M2 

Annual percentage change, M2 (deposits included in broad money) 

MacroBond 

Exchange rate EUR/EUR 

Not applicable. 

Real eff. exchange rate 

Price change % CPI. 

Financial indicators 

Interest rate 

Bond yield 

Stock markets 

Credit growth 

Average loan interest rate. 

Government bonds, 1 year, auction, yield. 

Not available. 

Annual percentage change, ODC balance sheet, assets, gross loss and 
lease financing. 

Deposit growth 

Annual percentage change, ODC deposits. 

Non-performing loans 

In % of total. 

1.4. 

1.5. 

1.6. 

1.7. 

2 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

3.7. 

3.8. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

5.6. 

MacroBond 

MacroBond 

SOK 

Central Bank of 
Kosovo 

CB Kosovo 

IMF, CB Kosovo 

CB Kosovo 

MacroBond 

CB Kosovo 

MacroBond 

Central Bank of 
Kosovo 

MacroBond 

MacroBond 

CB Kosovo 

IMF, Ministry of 
Finance  

MacroBond 

6. 

Fiscal developments 

6.1. 

General government balance 

In percent of GDP, Q/Q GDP 

6.2. 

General government debt 

In percent of GDP. 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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