REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART I:
only a limited portion of total import comes from Western Balkan countries (in FYR of
Macedonia 11, 7 per cent, in Croatia 5 per cent and Bosnia and Herzegovina 23 per cent).
It is visible that the effect of CEFTA agreement in changing existing structure so far has
been negligible.
Significant and rising imbalances in the trade and current accounts and a rising external
debt constitute potential risks to macroeconomic stability. In SEE current account deficits
continued to widen. Countries which experienced the largest deficit (Montenegro, Bulgaria,
Romania and Bosnia) are not the countries with the fastest growth (see table 7).
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Table 7: Current account deficit of South Eastern European countries
Region/Country
Current Account (mil US $) Current account as percentage of
deficit
GDP
Country 2003 2005 2007 2003 2005 2007
A. WBCs 6022 7743 14190 - - -
Albania 399 726 1151 -6.7 -3.9 -3.6
Bosnia and
Herzegovina
1629 1913 1939 -19.5 -17.5 -12.8
Croatia 2162 2555 4437 -7.2 -6.3 -8.6
FYR Macedonia 184 158 248 -4.0 -2.7 -3.2
Serbia 1532 2194 5285 -6.8 -8.6 -32.5
Montenegro 116 197 1130 -7.5 -8.4 -12.9
B. Members of EU 11390 22497 43312 - - -
Bulgaria 1022 3405 8592 -5.1 -12.5 -21.7
Hungary 6698 8418 8895 -7.9 -7.6 -6.4
Romania 3455 10054 23843 -5.8 -10.2 -14.4
Slovenia 215 620 1982 -0.8 -1.7 -4.2
TOTAL 17412 30240 57502 - - -
Source: EBRD, 2008
The current account deficit shows that all analysed countries were living above their
capacity of economy and possibilities and the majority of them show the rising level of
this deficit. This conclusion surfaced when we were presenting the total amount of deficit
(expressed in US $) for WBC and for SEE countries which had already joined the EU:
they were doubling its current account deficit every two years. Current account deficits
as a percentage of GDP in WBCs in 2007 ranged from 3, 6% in Albania to 32,5% in
Montenegro, with Bosnia and Herzegovina and Kosovo recording values over 12%.
In most countries, this percentage has increased since 2003, but reductions were seen in
Albania (almost 3 percentage points) and Bosnia and Herzegovina. This deficit is financed
by increasing net capital inflows. The SEE region as a whole has obtained a sizable amount
of foreign credits and FDI (table 8).
Relatively large flows of FDI entered into SEE countries, however on very uneven level.
Even though FDI flows did not contribute largely to growth of SEE economies at the
beginning of 1990s. Privatization FDI did not show any signs of contribution to the
GDP growth; however, more benefit is expected with the end of privatization through
Greenfield investment with direct and immediate effects on employment and output growth
(Jovančević, R. and Šimurina, J. 2008).