WESTERN BALKANS REGULAR ECONOMIC REPORT No.17 | Spring 2020 The Economic and Social Impact of COVID-19 SOCIAL PROTECTION RESPONSES “You and me” by Tanja Burzanovic (Montenegro) The RER No. 17 is a collection of notes on the Economic and Social Impact of COVID-19 that will be pub- lished in three parts. The first part was launched on April 29 and focused on the macroeconomic impact of COVID-19. This second part shows how the macroeconomic impact affects the people in the region. It discusses the social impact of COVID-19 in the Western Balkans in six separate RER notes on poverty and welfare, labor, health, education, air pollution, and social protection. The third part, to be launched in early June, will focus on specific economic policy response areas—fiscal, external, and financial sector—and the crisis impact on the private sector as reported by firms. THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 Options for social protection responses to the COVID-19 crisis in the Western Balkans1 The COVID-19 pandemic is affecting labor markets and people’s employment opportunities across the Western Balkans, and countries are stepping up their support to affected households. This note describes short- and medium-term options for economic support to households during the pandemic and the subsequent economic recovery period, and reviews measures that Western Balkan countries have announced or adopted. • In the short term all countries have expanded support to poor households by either increasing benefits or the number of beneficiaries of poverty-targeted programs, or implementing universal cash transfer programs. Countries are also boosting their support to the unemployed, and programs helping firms to retain workers (i.e. wage subsidies). • In the medium-term it will be important to continue supporting poverty-targeted programs and provide support to the unemployed. Active Labor Market Programs should also be expanded as labor demand will shift across sectors and many workers will need retraining and support to find new employment. • There are clear financing tradeoffs between programs and across time, and spending will need to be prioritized. It will be important to improve the targeting while guaranteeing the long- term funding of social protection, and limit the duration of wage subsidy programs, which are expensive. • In the medium-term benefit levels of unemployment insurance, social assistance and pensions may also need to be revised, in particular the additional temporary payments associated with the crisis response. At the same time Employment and Active Labor Market Programs that have shown to be effective should be expanded, while ineffective ones should be closed. • The medium-term recovery phase also presents an opportunity to strengthen social protection systems to make them more resilient and improve their ability to respond cost-effectively to future crises. A simple emergency support Figure 1 summarizes the response options. framework In the short term, there is a need to avoid unnecessary layoffs generated by the economic Options for the social protection response impacts of the pandemic. Firms are affected by to the COVID-19 crisis can be classified disrupted supply chains, operating restrictions into emergency responses to the pandemic, (closure or limited hours), and lower demand, and longer-term responses to support and both wage workers and self-employed may households to cope with a very likely longer- lose their job or activity. Given the transitory term economic crisis. nature of the COVID-19 shock, retaining workers will facilitate firms’ ability to recover 1 This note has been prepared by Alicia Marguerie, Karla McEvoy, Gonzalo Reyes, and Jamele Rigolini. The note benefited from comments from Stefanie Brodmann, Sanja Madzarevic, Cem Mete and Fadia Saadah, Marc Schiffbauer, Edith Kikoni, Enrique Blanco Armas, Jasmin Chakeri, and Gallina Vincelette. Social Protection Responses  |  1 WESTERN BALKANS REGULAR ECONOMIC REPORT NO.17 OPTIONS FOR SOCIAL PROTECTION RESPONSES TO THE COVID-19 CRISIS IN THE WESTERN BALKANS from the subsequent economic crisis, as proven economic downturn may persist for some in the former 2008 economic crisis.2 time. Labor market characteristics specific to the Western Balkans may also affect some However, lay-offs will be inevitable— households specifically hard. For instance, especially in critical sectors hit by the shock international travel bans may affect seasonal such as tourism, trade or transport. On top and temporary migrants who were finding of lay-offs, one can also expect downward job opportunities in countries whose borders adjustment to wages and reduced working are now closed. Remittances—an important hours. There is a need therefore to provide source of income for many households in the emergency household support to both formal Western Balkans—may also decrease. Until and informal households affected by the shock the economy will have recovered, there will be through expanded social assistance and social a need to support households who have fallen insurance measures.3 These measures may into poverty and near-poverty, as well as the differ from pre-crisis support measures given unemployed, through expanded safety nets the massive number of people affected and the and social insurance, and help them to find need to rapidly enroll and support households. new jobs through employment promotion measures. Fiscal implications will, however, be Restrictions to economic activity to respond substantial and governments will need to find to the pandemic—at least in their most a balance between measures to support growth dramatic form—will need to be time and investments and household support within bound given their substantial fiscal costs. a sustainable fiscal stance. But even after they have been relaxed, the Figure 1. A simple emergency response framework Health Shock Economic Shock • Mandatory firm closures - • Firm closures/restructuring - layoffs layoffs • Social distancing • Increased short/long term unemployment • Sickness • Increase in poverty/vulnerability A. Short-term employment support Social Protection to avoid layoffs responses B. Emergency household support through safety nets and social insurance C. Expanded household support through safety nets, social insurance and employment promotion 2 See also the companion RER note: “Western Balkans Labor Markets under the COVID-19 Shock” for a detailed discussion on the potential employment and wage impact. 3 See also the companion RER note: “COVID-19’s Impacts on Poverty and Household Welfare in the Western Balkans” for a detailed discussion on the potential crisis impact on poverty and the income distribution. 2  |  Social Protection Responses THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 Throughout all phases, support will need to slow-down to allow firms to keep the current be tailored to people’s profiles. The support workforce employed. that can be provided to formal sector workers, for instance, may be different from the support Employment or wage subsidies are (direct) that can be provided to informal workers, or transfers to employers designed to fully or the near-poor. For support to be effective, each partially cover the wages of the workforce. group may require dedicated policy responses, Workers remain employed at a lower cost and given the massive scale of the challenge for the firms, despite reduced or zero hours some prioritization may become necessary. worked. Eligibility for wage subsidies can be conditioned on firms retaining a certain percentage of their workforce. Wage subsidies Short term responses to the COVID-19 have proven effective at preventing employment crisis destruction during former large-scale crises. However, they need to be large enough to Countries in the Western Balkans have incentivize workers’ retention and can end adopted a wide range of social protection up being quite costly for the government. In policy responses intended to support formal major OECD economies wage subsidies for sector workers, the unemployed, the poor furloughed workers have been set as high as and the elderly, which we review below. Some 90% in Denmark and 80% in the UK. Such of these measures (such as wage subsidies) may levels are difficult to finance in most upper- be a valid policy tool in the short term, but middle-income and lower-middle-income remain quite expensive and may be less effective countries. In North Macedonia, for instance, as a medium term response. It will therefore be it has been estimated that an across-the-board important to change and adapt the policy mix wage subsidy paying 250,000 employees the across response phases. minimum wage may cost more than €60 M per month. On the firms’ side, having to cover the remaining part of worker salaries—if required Short term formal-sector firm support by the crisis response measure or the country’s to avoid layoffs labor legislation—can still be challenging when facing liquidity constraints, and eventually be In the short term, actions can be taken to ineffective to prevent dismissals. A potential retain workers in formal sector firms as change in the legal framework can further a response to a temporary supply shock. help firms by allowing them to pay part of Keeping workers employed limits the number the uncovered salary only up to a certain limit of people unemployed, the number of (which means lowering wages temporarily). households requiring further social assistance and, even more important, maintains the There are a few options to improve the cost- working relationship between firms and the effectiveness of wage subsidies. One option is workforce that is key to prepare the relaunch of to (partially) compensate workers for reduced production after the crisis. Several instruments hours while firms keep paying (partly or fully) exist, based on the same underlying idea: the remaining effective work time. Known as reducing labor costs in times of economic “temporary short-time work schemes”, this Social Protection Responses  |  3 WESTERN BALKANS REGULAR ECONOMIC REPORT NO.17 OPTIONS FOR SOCIAL PROTECTION RESPONSES TO THE COVID-19 CRISIS IN THE WESTERN BALKANS option is followed in Germany, France and Italy, revenues due to the crisis. In Montenegro, two- among others, but requires a system allowing month wage subsidies of up to 100 percent of to target only workers who have reduced work the minimum wage have been announced for hours or have been furloughed. Another option all firms in affected sectors, as well as six-month is to target specific firms in terms of sectors wage subsidies for newly reported employment (tourism, hospitality) or size: micro, small and in all sectors to encourage labor formalization. medium firms are more likely to require support given the liquidity constraints they face. Reducing other payroll-associated costs (usually social security or pension Timely announcement and implementation contributions) is another way to subsidize of wage subsidies are key to avoid massive wages. Those are paid by the employer on layoffs, as the liquidity pressure on firms is top of the net wage, and differed payments of likely to generate dismissals very early in those taxes or waivers can reduce temporarily the crisis. It is also important to keep wage labor costs. These measures can be conditioned subsidies limited in time: they are only effective on firms retaining all or a certain percentage as a temporary measure to help firms rebound of their workforce for some specified period. after the shock, and are by no means effective Implementation is likely to be faster as it relies long-term substitutes of unemployment on an existing system and registry. However, it insurance and social assistance, which are can disrupt the functioning of other agencies much more cost-effective given their targeted related to pensions and social security. Deferral nature. Finally, they should be thought of as is preferable to exemption or reduction, complementary to other measures supporting from a budget perspective. Otherwise, the firms’ liquidity such as subsidized loans or government should allocate from the general capital grants, conditional on maintaining budget additional resources to cover foregone workers. contributions to maintain the long-term sustainability of social insurance and pension Kosovo, Montenegro, North Macedonia funds. Similar to direct wage subsidies, a small and Serbia have announced wage subsidies decrease in total labor costs might not be to support employment. In Serbia, the enough to keep workers, but this measure can government announced that it will cover 3 be complementary to direct wage subsidies, or months the wages for micro, small and medium to other measures helping firms to face liquidity enterprises. In large enterprises, 50 percent of constraints. the minimum wage will be paid to all employees whose contract has ended due to the crisis. In Bosnia and Herzegovina, Kosovo and Kosovo, monthly wages will be covered for Montenegro are moving forward with deferral April and May by an amount equivalent to or waivers of other payroll-associated costs. the minimum wage, a measure amounting to Kosovo announced the coverage of pension €41M. In North Macedonia, wage subsidies contributions for April and May, amounting (paying minimum wage, again) have been to €8M. In Montenegro, firms can defer the announced for two months for 9,000 craftsmen payment of personal income tax and social and around 250,000 employees of private security contributions, in the most affected sector firms registering at least a 30% decline in sectors firms are fully exempted for 2 months. 4  |  Social Protection Responses THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 In Bosnia and Herzegovina, both entities are consider a lump-sum benefit paid for one time subsidizing or covering contributions, albeit in to complement UI benefits. Finally, countries different forms (see the Appendix). may also have to extend the duration of benefits possibly to at least 5-6 months, including for beneficiaries who may not have contributed Social insurance measures to respond the required number of months for benefitting to the crisis from the full benefit package. The most common social insurance  ome of these measures are being adopted or S measures that have been adopted so far cover have been announced. For instance, Albania unemployment insurance and pensions. will provide double unemployment benefits, and Montenegro will provide a one-time Unemployment insurance. All Western payment of €50 to complement benefits to all Balkan countries, except Kosovo, have an unemployed. In Serbia the government will unemployment insurance (UI) scheme in allow applicants to submit their unemployment place. The COVID-19 crisis is expected to benefit requests to the National Employment significantly increase unemployment in all Service via email or by post. All countries have countries and having these systems in place also allocated additional resources to cover the presents a great response advantage. However, expected increase in unemployment benefit the crisis will require some design changes. recipients. Systems may need to provide additional temporary benefits or relax some qualifying I  n the medium to long-term, especially if the conditions in order to respond to the sudden recovery process takes time, it will also be increase in unemployment. Governments also important to look at the fiscal implications of need to reinforce the administrative capacity financing a long-term spike in unemployment of unemployment insurance schemes and benefits, and gauge them against other measures public employment services to respond to the aimed at supporting the recovery process. The surge in demand for their services, facilitating likely increase in unemployment benefits has registration of unemployment status and much larger fiscal implications than, say, social processing of payments. Possibly, waiting assistance. Preliminary calculations suggest, periods will need to be lifted and procedures for instance, that if the unemployment rate streamlined to reduce waiting times. would double in North Macedonia, and the benefits would be extended by two months, the  ased on the existing regulations, a range of B additional cost of the programs would be more measures would be available to Western Balkan than €70 M on an annual basis. Depending countries. Among others, countries could on the length of the recovery process, it may reduce the period of contributions required to be therefore necessary to explore changes in be eligible for benefits. Countries could also program design to ensure that Governments adapt benefit levels in the short term, especially will be able to honor unemployment benefits as in systems that currently provide a relatively they are currently designed. low flat benefit (Montenegro, Albania and the Federation Bosnia and Herzegovina), or Social Protection Responses  |  5 WESTERN BALKANS REGULAR ECONOMIC REPORT NO.17 OPTIONS FOR SOCIAL PROTECTION RESPONSES TO THE COVID-19 CRISIS IN THE WESTERN BALKANS Pensions. Although the elderly is the most Social assistance responses for the poor at-risk group from a health point of view, and near-poor they should be protected from the economic Social assistance or social safety nets have downturn if they count on a pension payment. the greatest potential to support poor, near- However, pension schemes should be adapted poor and informal households experiencing to the needs of social distancing and quarantine income loss because of the economic effects regulations. Beneficiaries may also need of COVID-19. Such programs provide direct additional support to remain at home, limit support either in the form of cash or in-kind their trips outside and cover any additional goods and services that smooth consumption, health related costs that may arise. To avoid compensate for higher prices, and help prevent unnecessary trips and foster social distancing, further falls into poverty. Such programs have governments can lump payments into larger, been used to respond to economic crises, natural less frequent transfers, especially when disasters, and epidemics like the 2008 Food, payments are collected in person. Verification Finance and Fuel crisis and the 2014–2015 requirements that are done in person can also Ebola outbreak. Potential options for using be postponed. And an additional payment or social assistance to address the immediate and one-time lump sum payment can be considered longer-term impacts of COVID-19 include: to compensate for additional costs, especially for low-pension beneficiaries. Given the Streamlining of recertification procedures. massive tradeoffs in spending many countries Most social programs require households to are facing, it would be important to gauge the verify eligibility and renew their registration need for pension increases against other social on a regular basis. Some programs also have assistance and social insurance needs and ensure a time limit for eligibility. The pandemic through proper communication campaigns complicates the process of recertification, which that any Covid-related pension increase will be also becomes less relevant given that fewer limited in time. households are likely to have become ineligible. Time limits should also be temporarily relaxed S  everal Western Balkan countries have given the low likelihood that beneficiaries announced measures for pensioners. In Serbia, would be able to graduate or find employment. for instance, all pensioners will receive one- Several Western Balkan countries have off support in the amount of 4000 dinars streamlined recertification procedures. In (around €35) and pensioners can give special North Macedonia, for instance, the 3-months authorization to someone to collect payments rule for income assessment has been relaxed to on their behalf. In Kosovo all verification take into account households’ sudden drop in requirements have been suspended, and income; and in Serbia the government extended pensioners with a pension of less than €100 will social assistance entitlements on the basis of receive a temporary €30 top up. previously issued decisions, for a maximum of three months. Streamlining admission procedures for social assistance. The crisis will lead many near-poor households to fall into poverty 6  |  Social Protection Responses THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 and make them eligible for social assistance. Enrolling near-poor beneficiaries on a Admission procedures should be streamlined temporary basis. Social programs may also to ensure proper and timely admission of these want to relax eligibility rules to enroll, on a beneficiaries into the social assistance scheme, temporary basis, near-poor households that and communication campaigns could be set would not qualify for benefits under normal up to make households aware to encourage circumstances. This is because eligibility criteria, households to check eligibility and apply—a such as proxy-means tests, are not necessarily strategy that is currently being adopted in able to capture sudden drops in income Bosnia and Herzegovina. (especially for informal workers), and because many near-poor households are almost as badly Supplementing benefits to existing affected by the crisis as poor ones. Expansion beneficiaries on a temporary basis. There of social assistance to near-poor households on is also a rationale to supplement benefits to a temporary basis is particularly desirable in existing social assistance beneficiaries to tackle countries with low coverage of social insurance the economic and health challenges they are systems, such as countries with large informal facing, such as increased medical expenses and sectors or low employment levels. Many restrictions on any type of economic activity. Western Balkan countries are considering such Most Western Balkan countries are planning to expansion on a temporary basis. In Albania, for expand such benefits. Among others, in Albania instance, self-employed families will receive a recipients of Ndihma Economike (the flagship special benefit equivalent to a state-set monthly cash transfer program) will receive double salary; and Kosovo plans to pay €130 to the amount of benefits on a temporary basis; citizens who lose their jobs due to the public Kosovo plans an additional payment of €30 per health emergency situation, for April, May month to all beneficiaries of social assistance and June. An important issue to consider is to and pension schemes who receive a monthly communicate appropriately their temporary payment lower than €100; and in Montenegro nature. In contrast with conventional social nearly 11,900 pensioners receiving the lowest assistance, beneficiaries should not expect these pension and 8,500 beneficiaries of the family benefits to continue indefinitely. allowance will receive a one-off payment of €50. Some vulnerable groups, such as the elderly,  ome countries in the region have also opted for S may also benefit from in-kind distribution of a one-off universal transfer to every adult (i.e. critical goods: Bosnia and Herzegovina, for Serbia, Montenegro). While there are benefits in instance, announced that it will deliver basic a universal approach (for instance, the transfer care packages (consisting of personal and would reach many vulnerable informal workers household hygiene products) to the elderly and who may not be eligible for social assistance), the vulnerable who need permanent care in it is important that such approaches do not specialized institutions. While these additional undermine the country’s ability to properly payments can greatly support the increased finance poverty-targeted safety nets in the needs of vulnerable households, it will also medium term, especially given the significant be important to pair them with appropriate increases in poverty rates expected during the communication campaigns that stress the crisis and subsequent recovery. temporary nature of these benefits. Social Protection Responses  |  7 WESTERN BALKANS REGULAR ECONOMIC REPORT NO.17 OPTIONS FOR SOCIAL PROTECTION RESPONSES TO THE COVID-19 CRISIS IN THE WESTERN BALKANS What about the informal sector? contacts with the formal sector through formal sector suppliers and microcredit institutions, Supporting informal sector workers in for instance. Hence, even if incomplete, it may times of crises is a major challenge since, be possible to compile lists of informal sector by definition, informal firms and workers firms to which some form of support could be are not registered with the Tax and Social provided. Insurance authorities. Yet, it is important to support them both from an equity perspective (the poor work to a large extent in the informal Medium-term options: Balancing sector), and from an economic recovery household support with recovery perspective (informal firms, even if they do measures not pay all taxes, still contribute to economic growth, are part of the value chains and provide Most short-term social protection options employment to people who may need support for household support remain valid in the from the State otherwise). medium term. Nevertheless, in the medium- term it will be challenging for some countries There is no silver bullet to support the to balance households’ support with stimulus informal sector, and some informal firms measures as both interventions will require and workers will inevitably fail to receive substantial investments. The economic support. But there are ways to provide support consequences of the health pandemic will to important informal sector populations. last for a substantial amount of time—hence One can, for instance, expand social assistance there is a need to prioritize interventions program to near poor households who do not across programs, but also across time. While it receive a formal income or other forms of may be tempting to frontload the heavy fiscal public support. These households are likely artillery at the beginning of the pandemic, to be significantly affected by the crisis and it is important to keep some fiscal space for supporting them is also important from a sustaining a lengthy economic recovery. In public health perspective—if they do not social protection, priority should be given to receive support, they are likely to keep working, maintain the ability to finance an expanded reducing the effectiveness of social distancing poverty-targeted safety net that is the last measures. A few Western Balkan countries, bastion to prevent poor households falling such as Albania and Kosovo, have announced into extreme destitution. Program design similar measures. And while fiscally expensive, and legislation concerning social insurance universal, one-off transfers as announced in may also be modified to maintain the ability Montenegro and Serbia guarantee the coverage to finance significant medium-term increases of the informal sector. in unemployment claims.4 In parallel, once employment restrictions are lifted, employment A second channel is support to informal programs aimed at supporting re-entry into firms. While many of them are not formally the labor market should also be improved and registered, most informal firms do have limited expanded. 4 See the companion RER note: “Western Balkans Outlook: Hard Times Require Good Economics” for a detailed discussion on the tradeoff between short-term crisis mitigation and medium-term policy measures. 8  |  Social Protection Responses THE ECONOMIC AND SOCIAL IMPACT OF COVID-19 Ensuring adequate financing while Overall, Western Balkan countries spend improving cost-effectiveness of social very little in ALMPs, and programs offered protection programs by public employment services are not always It is important to ensure adequate medium- tailored to the profile of the population they term financing of social protection programs, serve, or the needs of the economy. It will be while at the same time working towards important therefore to improve and expand improving their cost-effectiveness. Rapid ALMPs and make them relevant to the needs response programs that may be appropriate of the recovering sectors. Efforts to expand in the short-term (such as a universal, one-off and adapt to current needs could start early, cash transfer) may not be sustainable in the for instance through online counseling and medium-term, especially when the need to trainings, which can be developed even while finance additional recovery measures is taken social distancing and transmission control into consideration. In the medium term it may measures remain in place. In Romania, for become therefore important to enhance the instance, the government authorized all training cost-effectiveness of social protection measures activities to take place if delivered online; and by, for instance, reassessing benefit levels and in Estonia, the government offers online job improving the poverty-targeting of safety nets, search counselling and intermediation. It will and better linking social assistance beneficiaries also be important to improve partnerships, to employment programs that support collaborations and coordination with private reinsertion in the labor market. Benefit levels sector employment service providers, which at of unemployment insurance and pensions the moment is very limited. may also need to be revised (in particular the additional temporary payments associated with the crisis response), to ensure the ability to Initial conditions matter: an opportunity for sustainably financing the system. strengthening social protection systems The ability to respond cost-effectively to Boosting employment promotion policies crises varies substantially across countries to support re-entry in the labor market and depends to a large extent from their initial fiscal space, and systems’ ability The crisis will not only generate massive to rapidly adjust and expand in times of movements in and out of employment, but crises. Social protection instruments such as by affecting sectors differently, it will also social registries, simplified and automated generate a reallocation of jobs and economic registration and verification procedures, up-to- activity across sectors. The jobs people lost date and integrated social security and payroll will not necessarily be the same jobs that will databases, well-developed payment systems, be available to them, and there will be a need to and employment legislation that allows for boost active labor market programs (ALMPs) adjustments in times of emergencies not to retrain many job seekers and help them find only permits delivery of better tailored social employment in new sectors. assistance in normal times, but also allows systems to expand rapidly in times of crises in a cost-effective manner. The medium-term Social Protection Responses  |  9 WESTERN BALKANS REGULAR ECONOMIC REPORT NO.17 OPTIONS FOR SOCIAL PROTECTION RESPONSES TO THE COVID-19 CRISIS IN THE WESTERN BALKANS recovery phase presents an opportunity to strengthen social protection systems to make them more resilient and improve their ability to respond cost-effectively to future crises. One example are wage subsidies. In many EU countries the State only pays for the actual number of workers who do not work, or for a reduction in working hours; and legislation is in place to allow firms and the State to temporarily lower salaries/payments to workers who have been furloughed. Such legislation and monitoring ability—which requires social security and payroll databases to be well- integrated and up-to-date—is lacking in many Western Balkan countries, which will need to rely on much more costly and less effective across-the-board wage subsidies. A similar point can be made for social registries and automated registration/ verification procedures. Social registries merge information from databases across several ministries to maintain up-to-date information not only about beneficiaries from social assistance programs, but also about the general population. Well-developed social registries can therefore help identifying population groups that are particularly affected by crises and accelerate their enrolment and verification procedures. 10  |  Social Protection Responses Western Balkans Regular Economic Report No.17 | Spring 2020 Social Protection Responses View this report online: www.worldbank.org/eca/wbrer You and me by Tanja Burzanovic (Montenegro) Dr. Tatjana Burzanovic has a wide experience in the fields of graphic design, graphics in architecture, interior design. She has worked as an art editor, interior designer and graphic designer at various levels. Many of her art exhibitions have taken place at different places. She has received many awards for her arts and literary works. She has published a book with a title The Interrelation between Art Worlds, with the support from the Embassy of India for Austria and Montenegro in Vienna. Her artistic philosophy includes displaying of interrelationship between art worlds (spatial and temporal arts). The artist thus meditates between nature and the sprits and yet stems from the absolute idea and serves the goal of realization of absolute sprit. ‘Grasping the meaning through the form’ is a task of the art set by a contemporary thinker to demonstrate that building forms and creating sense are two simultaneous, intertwined, and absolutely inseparable processes in Arts. Without that recognition it is not possible to take any further step in investigating the nature of art and literature. She believes that art is a way to search the truth. Art is inseparable from searching the truth. People forge ideas, people mold dreams, and people create art. To connect local artists to a broader audience, the cover of this report and following editions will feature art from the Western Balkan countries.