Economic Development, Unemployment and Inflation in the Western Balkans

Abstract

Economic security is one of the main challenges facing the Western Balkans. Poverty, unemployment and inequality threaten the everyday security of average citizens in the region. The Western Balkan economies have emerged from a serious economic recession and are in search of a new growth path on their way to eventual EU membership. However, they are beset by numerous economic and social problems that hinder their progress. The economic transition in the Western Balkans implicated a large structural change which has come through the processes of privatization and enterprise restructuring which caused the disappearance of many professions and jobs and have made the stock of skills inherited from the former system obsolete. All countries in the Western Balkans are striving to join the European Union. This transformation process presents enormous challenges and requires many changes and improvements in various fields especially when regards the economic development and employment. The Western Balkan (WB6) region, consisting in small emerging market economies, is aspiring to embark on an export-led growth and convergence path. After a late start in transition due to civil wars, the region experienced notable income growth nearly doubling its real GDP level in the last two decades. However, income convergence with advanced Europe has been less impressive when compared to new member states, partly reflecting lower exports. Western Balkan countries have the same problematics which regard widespread corruption, the presence of organized crime, the lack of freedom of legal functioning, and the deep politicization of public administration. The countries differ according to the importance and the sensibility of their problems, politics will treat them according to their platforms, legal frameworks in place and capacity for enforcement. These issues have a great impact for economic performance, generating employment, state revenue collection, and the development of small and medium enterprises. These problems are rooted in the general state of democracy and the political culture in the region, as well as diplomatic issues surrounding statehood. The main aim of this paper is to reflect and analyze the economic development through GDP in the Western Balkan in relation to unemployment and inflation. The analysis is based on the literature review, on the reports given form different structures and also based on quantitative data form the Worl Bank for Western Balkans’ countries on GDP, unemployment and inflation and testing their correlations through the e Ordinary Least Squares (OLS) Model. At the end of this paper based on the theoretical and practical review are give the conclusions and the recommendation of the study.

Received: 10 September 2022 / Accepted: 21 October 2022 / Published: 30 November 2022