Non-EU states, prudent spending can boost Southeast Europe growth

Source:Xinhua Published: 2013-3-24 9:42:55

 Southeast European economies would grow relatively well, as doing business with non-European Union (EU) states and making reasonable public spending could boost their development.


According to the statistics released by the European Commission, GDP of Europe will increase 0.1 percent in 2013.

Tsvetan Simeonov, President of the Bulgarian Chamber of Commerce and Industry, told Xinhua that most of the EU members will experience a standstill in their economies in 2013.

He said, "I cannot expect any increase according to the indicators of national consumes, employment and investment."

Desislava Nikolova, Chief Researcher at Sofia-based Institute for Market Economics, said "What we see is happening in Cyprus in recent days clearly shows that the biggest problem with the debt crisis in the European economy as a whole is not at all resolved, and it continues to smolder."

She suggested that this problem will be on the agenda for at least the next five to 10 years, as these huge mountains of debt that must be cleaned and overcome, can not be resolved within a few months or year.

According to her observation, the expenditure of the welfare states is one of the root reasons of the debt crisis. The measures that these countries have taken are mainly focused on raising taxes, while the effects of fiscal austerity are far less than the requirements of the spending cut.

While the experts thought the Balkan economies will grow faster than the Western Europe with its increasing exports and the interest from the foreign investments.

"Balkan economies are expected to grow 2 percent to 2.5 percent in 2013, which is a decent growth compared to what is happening in the Western Europe," said Nikolova.

Vesselin Iliev, Director-General on International Economic Relations at the Bulgarian Industrial Association, said that there are young economies in former Yugoslavia, which is now gaining strength and there is interest in investing there now.


In the last year, the Bulgarian exports to the EU declined, but was partially offset by very good growth in exports to third countries, states outside the EU, Nikolova says. China is one of the countries to which export growth doubled last year, she said.

"I think these third markets are one of Bulgaria's chances to export in the coming years. These third markets, including the Balkan countries and Turkey, are a chance for Bulgaria, for example, to offset the contraction in the European market," she said.

As for Turkey, it will grow more slowly than in the past, but will continue to be a factor in the region, Iliev said.

"We have yet to see Turkish investments in Bulgaria, while in Romania Turkish presence will increase especially in metal processing sectors," Iliev said.

"I notice increasing cooperation between Greece and Turkey," he added.


Fundamental macroeconomic problems of the sick member states remain, and what is being done to address them, are rather baby steps, Nikolova said.

"At the moment what we see in most countries, is more focused on the revenue side and attempt to seize more money from taxpayers in the form of higher tax burden, than focused on the expenditure side, which is actually a problem," she explained.

"The problem is with the huge welfare states and huge budgets, which tried to cover all sectors of the economy, helping everyone. It cannot happen if at the same time the economy is not producing enough," Nikolova said.

Tsvetan Simeonov also told Xinhua that important potential exists in cost containment and efficiency.

"They should be directed to areas that generate added value. If funds continue to go into unreformed systems, the effect will only be negative," he said.

Meanwhile, unemployment is a major problem in the EU as a whole, Simeonov said. In Bulgaria, it is 12 percent, and unemployment is mainly structural -- there are industries where there is no unemployment, such as the IT sector, while the other sectors of the economy need more skilled workforce, he said.

Youth unemployment in the EU is also very high, amounting to 22.6 percent in 2012 and rising to 23.4 percent in March 2013, he said.

Hence, continuous improvement of education and training is required, along with reorientation of young people to sectors with high added value, Simeonov said.

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