Balkan Reforms Lag, Economic Freedoms Weak

Economic freedoms in the Balkans are suffering because of bloated governments, state monopolies, inconsistent regulations and widespread corruption, said the 2009 Index of Economic Freedom report, which stressed that further economic and fiscal reforms were crucial at a time of global recession.

Out of all Balkan countries, Bulgaria was the front runner coming in at 56th place. There was respectable showings by Albania at 62nd place, Romania at 65th and Slovenia at 68th place, which however managed the biggest gains in economic freedom in Europe, improving its score by 2.7 points in 2008.

Macedonia and Montenegro placed in the middle tier, ranking 78th and 94th respectively. The biggest laggards of the region were Serbia at 109, Croatia at 116 and Bosnia-Herzegovina at 134, just ahead of Ethiopia.

"Business freedom, government size, monetary freedom, investment freedom, and freedom from corruption are weak," the report said of Serbia, while on Croatia it noted that its "overall weakness stems from its outsized government", while "in addition to high levels of government spending, the government's presence in other key areas of the economy is considerable."

Bosnia's position at the bottom of the European pile, ahead only of Russia, Ukraine and Belarus, was due to the "inefficient and high government spending, weak property rights, and widespread corruption" that "hold down overall economic freedom...and discourage entrepreneurial activity."

"As a result of sluggish privatization of state-owned enterprises, the private sector's contribution to GDP has grown rather slowly," the entry on Bosnia added. "Bureaucratic and non-transparent regulatory systems remain a problem for foreign investors and domestic entrepreneurs."

The report said the low flat tax rates of 10 to 15 percent – among the lowest tax rates in the world – along with strong focus on privatization and internal structural reforms were a driving force for strong growth in Macedonia, Montenegro and Serbia in 2008.

source: BalkanInsight.com