Poverty and growth in the Western Balkans: The Big Picture

1. Poverty and growth in the Western Balkans:The Big Picture Luca Barbone The World Bank

2. Main messages • In the decade before the crisis the Western Balkans experienced significant progress • The crisis has stalled these positive trends and brought in new fiscal pressures • Yet the need to tackle structural issues remain • Priorities for the inclusion agenda are • Social assistance reforms • Activation • Addressing barriers that vulnerable groups face

3. Positive developments before the crisis

4. though structural concerns remained • Labour force participation rates remain some of the lowest in Eastern Europe … • Activation as a policy priority • … while households rely heavily on migration and foreign labour markets • Agriculture’s contribution to growth decreased while poverty remains disproportionally rural • Turning agriculture into an engine of growth • Sustaining poverty reduction in rural areas • Some groups such as the Roma are at distinct disadvantage • Integration agenda

5. The crisis stalled progress

6. … compounding the challenges Poverty trending up and overshooting pre-crisis levels Worrisome developments on the labour market

7. Example 1Effects of the crisis on the unemployed in Serbia

8. Example 2Vulnerability undermines resilience to future shocks in MNE Households that experienced a shock reduced investments in insurance, preventive healthcare, and training Those in the lowest quintile were most likely to cancel insurance or reduce preventive care as a coping mechanism

9. Government in the region now face a worsening fiscal environment

10. And they need to do more with less Need to improve coverage of social assistance despite a reduced fiscal envelope … reduce spending on rights-based or categorical SA; improve uptake and coverage of means-tested LRSA benefits; reducing work disincentives; make benefits more flexible to respond to crisis and policy shocks.

11. The World Bank and the emerging inclusion agenda • Support to structural reforms • Improving social assistance • DPLs supporting improved targeting and rebalancing of priorities in the social assistance budget • Tackling the activation agenda • Work on active labour market programs – design and evaluation • Addressing challenges of inclusion • Work on the benefits of Roma inclusion • Gender monitoring and gender analysis of reforms • … while strengthening capacity to monitor and analyze welfare indicators and the distributional impacts of reforms

12. Conclusions Current environment is challenging as it requires to do more with less Opportunities of building on the positive dynamic in the region before the crisis World Bank supports the new reform agenda of which the social inclusion priorities are a big part