Effects of the world economic crisis on exports in the CEEC: Focus on the Western Balkans

Abstract

The world economic crisis that paralyzed the world economy in 2008 and 2009 had a profound impact on all countries in the world. Due to the interconnectedness of national economies the crisis spread rapidly from its centre in the United States to the world. There were two main transmission channels for the spread of the crisis between countries - international trade and the exchange of private capital between states in the form of foreign direct investment (FDI). This economic downturn has greatly influenced the domestic economic stability of the Western Balkan economies. The Western Balkan countries have shaped their economic policy towards European Union (EU) membership, resulting in a high degree of liberalization in international economic relations accompanied by a commitment to free international capital movement. Since this region has close economic ties with the EU the crisis spread to the region very quickly, manifesting itself in decreasing regional exports to the EU market and a downward trend of FDI inflow to the region. This paper will focus on the impact of the world economic crisis on the Western Balkan economies and especially on their exports and FDI inflow. Our empirical analysis, based on panel data, uses a wider sample of Central and Eastern European Countries (CEEC) which includes the Western Balkans, since we wanted to analyze if the effects of the economic crisis in the Western Balkans are specific or are common to most countries in transition. The analysis shows that Western Balkan exports have suffered due to the crisis, but reveals some interesting results on the different dynamics of export flows which depend on regional trade integration for their destination

Competitiveness, Trade with the EU and Labour Markets: Challenges for the Western Balkans

“…Most research on trade between Western Balkan countries and the EU concludes that trade, even though it is rising, is still at relatively low levels (Botrić 2012;World Bank 2008) and that the 2008 economic crisis negatively affected their trade integration with the EU (Bjelić, Jaćimović and Tašić 2013).…”

Foreign Investments and Trade in the Western Balkan–Focus on Economic and Legal System

“…The intensive FDI flows have accelerated trade dynamics of the region with increasing both, the export and import. Global economic crisis has affected the Western Balkan countries in 2009, via trade and financial channels [14]. Export was collapsing, capital flows and remittances were declining together with the loss of external financing, lower tax revenue, tightened domestic credit conditions and pressure to the exchange rates [10].…”