Balkan Economic Development Outlook
The guest speakers (in alphabetical order) at this panel discussion were: Dr. Ante Babic, Founder/CEO of the Center for International Development; Ms. Annika Betancourt, Economic Officer at the U.S. State Department; Mr. George Bouma, Sustainable Development Division at the UNDP Regional Hub for Europe and the CIS; and Dr. Phoebe Koundouri, Founder/Scientific Director at the International Centre for Research on the Environment and the Economy.
For the benefit of the audience, the moderator presented an introduction to each of the economic development issues scheduled for discussion, and each introduction was followed by questions for the panel members. The introduction to each issue for discussion and the associated questions are set forth below while a video of the session is available here and on YouTube.
SUBJECT NUMBER 1: National Transformations and Sustainable Economic Development
There are countries within the Balkans that are concurrently undergoing multiple forms of transformations which present a burden as well as opportunities to the societies involved. These transformations primarily centre on social, political and economic transitions from a system of centralised state authority and planning to a democratic, de-centralised open market economy. At the same time, these countries are also dealing with post-conflict recovery, closer integration with Euro-Atlantic institutions, the EU accession process, the consequences of a global financial crisis, climate change, and the finite availability of natural resources on which human societies, key industries and employment depend.
Agriculture, tourism, mining, energy and pharmaceuticals are just a few of the key industries that depend on natural resources; however, as populations, international trade and economies expand, the availability and quality of natural resources used in the production of goods and services are diminishing as a result of extraction, alteration (as with hydropower development) and degradation. At the same time, however, the current national transformations must of necessity focus on long term economic growth, sustainable employment, global competitiveness and international trade.
- (i) What is the relationship between sustainable economic output and environmental management, and ii) are open market economies, as they are currently structured, a threat to the long term availability of the natural resources on which industries depend?
- Please explain how the process of these national transformations can work synergistically with sustainable economic development.
- How can sustainable economic development contribute to conflict prevention and conflict resolution?
SUBJECT NUMBER 2: The European Migration Wave
News organisations continue to report on the current European immigration wave stemming from asylum seekers fleeing war torn countries. Prior to this during the past 20 years, 5 million well educated and skilled Balkan citizens migrated for economic reasons to Western Europe from 6 Balkan countries – Albania, FYR Macedonia, Kosovo, Montenegro, Serbia and Bosnia-Herzegovina – which until recently were among the top migrant-sending regions in the world according to the World Bank Group*. Today the equivalent of one quarter of the current population of these countries lives outside their home countries. As a result, the Balkans continue to play a socio-economic role in the influx, exodus and re-distribution of regional as well as global populations.
The current scale of migration to and through the Balkans will have both positive and negative financial impacts as governments are called upon to provide additional services related to the new arrivals and as immigrants become absorbed into conventional business enterprises such as health care, construction, agriculture, textile and garment production, maintenance, tourism, fishing and odd jobs.
The conclusive net impact of this migration wave is yet to be calculated from financial revenue, expenditure, employment and demographic data; however, the European Commission’s autumn 2015 economic forecast calculates that the expected three million refugee arrivals by the end of 2016 will produce increases in annual GDP growth ranging from 0.2 – 0.5% in the EU countries that represent the destinations of most refugees, such as Sweden which has the highest share of refugees as a percentage of the population. The Commission report explains that non-EU migrants typically receive less in individual benefits than they contribute in taxes and social contributions. This has been demonstrated by the United Kingdom government which reported that between 2000-2013, new arrivals made a net contribution of £25 billion to public finances. The findings by the Commission are also consistent with a study by Oxford University Economics that forecasts a favourable impact on German economic growth due to migration to the country which is expected to take one million refugees this year.
[Note: On 9 November 2015, Mr. George Bouma, from the Sustainable Development Division of the UNDP Regional Hub for Europe and the CIS in Istanbul, Turkey, reported at the Balkan Economic Forum conference in Athens that 1 out of every 22 people in the world is a refugee, internally displaced or seeking asylum; one half of the refugees are children; an average of 42,500 people are displaced each and every day of the year; and the average time of displacement for a refugee is 17 years. The subject of human migration and its socio-economic impacts is, therefore, a global issue.]
- In view of the fact that ongoing conflicts are the principal source of the current migration, how will economists, NGOs and consultants to the public and private sectors address and incorporate the financial and economic impacts of this ongoing migration in their professional services and work product?
- Are there any consequences of the migration wave in and through the Balkans that are relevant to, or will affect, the regional programmes with which your organisations are associated?
* World Bank Group bi-annual Economic Report on South East Europe September 2015
SUBJECT NUMBER 3: Climate Change Impacts on the Economy
Mark Carney, Governor of the Bank of England, has warned of the potential risks to global financial stability from a new threat to world economies: climate change. The Bank of England reported the global insurance industry’s annual weather-related losses at $200 billion a year which is a four-fold increase in just 30 years.
The Balkans have already begun to experience severe weather-related losses. In 2014, Serbia and Bosnia-Herzegovina sustained roughly €4 billion in losses from record-breaking floods that damaged roads, railways, power generation, energy and water deliveries, agricultural land, mining, homes, schools and hospitals. The IMF World Economic Outlook forecast of the 2015 growth rate for Serbia was listed at 0.5% as a result of the flood damage to its economy while growth rates in some other Balkan countries unaffected by such weather-related losses were listed for Montenegro at 4.7%, Bosnia-Herzegovina at 3.5%, Kosovo at 3.3%, FYR Macedonia at 3.2%, Turkey at 3.1% and Albania at 3%.
Governor Carney is also chairman of the Financial Stability Board, which is the international body set up by the G20 in 2009 to monitor risks to the global financial system. In September 2015, Governor Carney said “The challenges currently posed by climate change pale in significance compared with what might come. The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security. The horizon for monetary policy extends out to 2-3 years. For financial stability, it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late. So why isn’t more being done to address it?”
In addition to the direct weather-related impacts on property and business infrastructure, additional global financial risks have been calculated by The Economist Intelligence Unit which has warned that private investors are expected to lose $4.2 trillion on the value of their holdings from the impact of climate change by 2100 even if global warming is held to 2 degrees Celsius.
- As climate change is beginning to impact a range of economic issues including national debt levels, agricultural output (such as wheat yields) and energy production (such as from hydropower), what reasonable steps can be taken now by the public and private sectors (a) in order that national governments and business enterprises can be better prepared for and mitigate the economic losses associated with property damage and business interruption, and (b) so that asset managers can better serve their clients?
SUBJECT NUMBER 4: Greek Economy
The consequences of the Greek financial downturn, which have been exacerbated by capital controls on banks in Greece and have resulted in reduced access to debt and equity financing, have impacted the country’s economic output and national debt level and, by extension, its exports, imports, domestic consumption, and its role as a host site for foreign as well as domestic investment.
Question: To Ms. Betancourt
- Given that individual economic sectors are likely to be affected in different ways – and this includes the fact that opportunities are known to spring from adversity, how have some key economic sectors been affected and, of these, which are likely to have a knock-on affect in other Balkan countries?
- What effect is the latest bail-out programme likely to have on the Greek economy if the conditions set forth by the creditors are satisfied and the Greek banks are re-capitalised?
- If we factor in the provisions of the European Union “Jobs and Growth Plan for Greece” initiative that paves the way for mobilising up to €86 billion in financial assistance to Greece over the next three years, in what ways will the economy benefit, and what is the overall short term forecast expected for Greece?
SUBJECT NUMBER 5: The New United Nations 2030 Agenda for Sustainable Development Initiative
On September 15 this year, 193 United Nations Member States adopted the UN 2030 Agenda for Sustainable Development to support global economic growth, social inclusion, environmental protection, and effective governance. The International Centre for Research on the Environment and the Economy (ICRE8) founded by Dr. Koundouri, who is also the organisation’s Scientific Director, was recently awarded the distinction of being one of three Greek institutions that will serve as a hub for this UN Initiative.
Question: to Dr. Koundouri
- Please explain how this initiative will be implemented and the role that your organisation will serve as part of this global initiative?
SUBJECT 6: Balkan Economic Development Outlook with a Power Point Presentation by Dr. Ante Babic