Social Sector Expenditure in the Western Balkans

1. Social Sector Expenditure in the Western Balkans RCC Conference What Kind of Social Agenda for the Western Balkans? Mary O’Mahony

2. Objectives of Presentation • Scene setter for presentations to follow • Compare expenditure trends among different WB countries • Compare social expenditure levels in the WB to those of the EU countries • Outline the social sector priorities identified by governments in recent Economic and Fiscal Programmes

3. Real GDP Growth and Fiscal Stance Severe impact of crisis; slow recovery; relatively low growth rates Source: IMF Data (latest published Articles IV as of April 2011)

4. “Austerity” Measures Sharp decline in revenues, marginal decline in expenditure. Marked decrease in capital expenditure. Current expenditure maintained or even increased in % GDP in % GDP Source: IMF Data (latest published Articles IV as of April 2011)

5. WB Expenditure by Economic Classification: Wage Bill Some decreased in spending on wages and allowances in public sector but lots of variances in % GDP Source: IMF Data (latest published Articles IV as of April 2011)

6. WB Expenditure by Economic Classification: Capital Expenditure ...in general capital expenditure reduced in % GDP Source: IMF Data (latest published Articles IV as of April 2011)

7. WB Expenditure by Economic Classification: Social Transfers At the same time, overall social transfers peaked in 2009 and are still above pre-crisis period. in % GDP Source: IMF Data (latest published Articles IV as of April 2011)

8. WB Expenditure by Functional Classification: Health Expenditure Some decreases in expenditure (NB approximate data) in % GDP Source: Functional Expenditure Data from the latest available EFPs/PEPs as of April2011)

9. WB Expenditure by Functional Classification: Education Expenditure In general education expenditure also decreased in 2009 and 2010 in % GDP Source: Functional Expenditure Data from the latest available EFPs/PEPs as of April2011)

10. WB Expenditure by Functional Classification: Social Protection Expenditure Social protection expenditure increased it share as % of GDP in 2009 due to additional unemployment pressures. in % GDP Source: Functional Expenditure Data from the latest available EFPs/PEPs as of April2011)

11. Comparison of WB and EUSocial Expenditure Source: For EU data EUROSTAT and for WB data IMF and EFPs/PEPs

12. Comparison of the WB Social Expenditure to the EU Lots of variance by country Source: For EU data EUROSTAT and for WB data IMF and EFPs/PEPs

13. EFPs – Social Sector Priorities • Importance of social sector highlighted but little detail on specific reforms or investments • Albania: Training programmes for unemployed, health and education are priority sectors for capital expenditure • Bosnia and Herzegovina: Reform of social transfers (agreements with IMF and World Bank), labour market reform and human capital development • Croatia: Capital investment in health care, social welfare, science & education. Administrative reforms of social welfare system

14. EFPs – Social Sector Priorities • FYR Macedonia: Capital investments in education, child care and social protection. Simplification of social benefits system and focus on labour market reform • Montenegro: Reforms in labour market, education, social protection and health sector. Use of PPPs to facilitate capital investments • Serbia: Reduction of share of social protection as % of GDP, reform of social protection system, education reform (rationalisation of school network) health care reform

15. Issues Arising • Stalled economic growth • Need to generate socio-economic development • Improve labour skills, increase productivity, higher value added products and services • Increased social needs, social inclusion issues • Pressure for reform of health, education & social protection systems • Alignment to EU/international norms • Financing sources for capital expenditure

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