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Rising Uncertainties (English)

Improving the efficiency and equity of public spending and strengthening revenue mobilization remains a priority in all Western Balkan countries. Public sector wage bills and pensions constitute the largest share of public spending in the region. Tighter controls on wage bills, reducing tax expenditures, and better targeting of social benefits would open space for more public investment, improve equity, and enable the build-up of fiscal buffers to mitigate rising risks. As outlined in this report, fiscal rules can help anchor spending and fiscal sustainability. However, their credibility in the region needs to be restored after they have been repeatedly breached in some countries. Fiscal management reforms are needed as a part of broader structural reforms that help increase the region's export competitiveness. This includes strengthening state institutions that protect the rule of law and private sector competition to unleash productivity growth and innovation by enabling a level playing field between firms. Together, these reforms would help unlock stronger, more equitable, and more sustainable growth, ensuring faster convergence with EU income levels. A strong commitment to sound macro-fiscal policy and structural reforms was always important—rising uncertainties have made it an imperative.


  • Author

    Schiffbauer,Marc Tobias, Kikoni,Edith

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  • Document Type

    Working Paper

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  • Total Volume(s)


  • Region

    Europe and Central Asia,

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  • Doc Name

    Rising Uncertainties

  • Keywords

    United Nations Interim Administration Mission in Kosovo; state-owned enterprise; access to international capital markets; Equitable Growth, Finance and Institutions; fiscal rule; Public and Publicly Guaranteed; labor force participation rate; consumer price inflation; public debt; unemployment rate; efficiency of public spending; Return on Average Equity; share of public spending; public sector wage bill; composition of public spending; regulatory burden on business; Cost of Doing Business; floating exchange rate regime; personal income tax revenue; public sector wage premium; decline in youth unemployment; Stabilization and Association Agreement; limited access to finance; fiscal deficit; foreign direct investment; current account balance; consumption; fiscal balance; youth unemployment rate; current account deficit; CAD; private credit growth; international trade tension; Labor Market; contribution of investment; Rule of Law; capital market development; trade balance; nonperforming loan; net export; social security contribution; publicly guarantee debt; unit labor costs; capital per worker; foreign exchange market; labor market development; Foreign Exchange Reserve; public finance; goods export; downside risk; foreign currency reserve; stable economic growth; private sector wage; global financial crisis; import of goods; international financial institution; new insolvency law; sovereign credit rating; public capital spending; demand for capital; low unemployment rate; private sector credit; trading partner; fiscal consolidation; minimum wage; tariff import; exchange rate appreciation; export of goods; inflow of remittance; prices for coal; price of transport; social protection program; Capital Adequacy Ratio; trade in services; economic policy analysis; social protection spending; tariff on import; total external debt; terms of trade; investments in energy; Private Sector Growth; oil price volatility; prudent fiscal management; labor market outcome; high tax burden; exchange rate change; loans to individual; regulation and supervision; total public debt; loans to business; total capital stock; debt service costs; labor market condition; foreign trade partners; reinvestment of earnings; improvement in governance; corporate debt market; rate of employment; government bond market; design of reforms; private sector player; domestic financial sector; crowding out; working age population; central government revenue; education and health; diversified investor base; investment time horizon; higher government borrowing; economies of scale; domestic institutional investor; imports of consumption; factor of production; public bond issue; high youth unemployment; maximizing tax revenue; government infrastructure spending; emerging market debt; output per worker; exchange rate volatility; number of banks; public sector performance; global economic prospect; targeted social program; public external debt; annual average growth; external economic shock; annual budget law; cost of labor; increase in labor; capital investment plan; ratio of debt; merchandise import; high tax rate; return on asset; lower interest rate; production of wheat; bank capital adequacy; constraint on debt; world trade organization; growth in trade; labor market regulation; movement of capital; terms of contract; dispute settlement mechanism; progressive income taxation; pay in cash; tier 1 capital; trade and services; high public debt; fall in demand; support sme; fiscal consolidation effort; indirect tax revenue; Performance and Accountability; industrial production growth; public wage; public revenue; trade tensions; household lending; public expenditure; trade deficit; several countries; productivity growth; retail trade; real gdp; private investment; private consumption; global trade; credit outstanding; global economy; monetary policy; high wage; capital expenditure; Job Creation; gross loans; external imbalance; remittance inflow; fiscal risk; food price



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Schiffbauer,Marc Tobias Kikoni,Edith

Rising Uncertainties (English). Western Balkans Regular Economic Report,no. 16 Washington, D.C. : World Bank Group.