IMF staff are projecting a resumption of growth in southeast Europe in 2000. GDP for the region is estimated to have contracted slightly in 1999, in part because of the Kosovo crisis but more so because of underlying macroeconomic and structural problems in the two largest economies, Romania and Croatia. Nevertheless, generally prudent macroeconomic management in most countries has provided a stable environment in which economic growth should rebound quite strongly in 2000 (see upper table). On average, Romania and Croatia are projected to continue to grow more slowly than the smaller countries in the region, but for both countries, growth is projected to firm during the year. In all countries, the sustainability of growth will depend on further progress in addressing macroeconomic imbalances and implementing structural reforms.
Inflation is now low in all of the countries of the region except Romania, where it is still over 50 percent. The Romanian government aims to reduce inflation to 27 percent by end-2000. Elsewhere, monetary and fiscal policies are generally consistent with maintaining low inflation.
Almost all countries in the region recorded better-than-expected external positions in 1999, with Bosnia and Herzegovina, Croatia, former Yugoslav Republic (FYR) of Macedonia, and Romania (see lower table) achieving significant reductions in their current account deficits. But even with continuing adjustment efforts in most countries, official balance of payments financing needs, including grants, are projected to be about $2.3 billion for the region in 2000. Financing for all but about $300 million of these needs has been provisionally identified—assuming the disbursement of sizable assistance committed, but not used, in 1999, and $400 million in net purchases in 2000 under existing IMF programs. Greater official balance of payments financing could still be used to support stronger adjustment and reform programs.
Project (as distinct from balance of payments) financing by official creditors is provisionally projected to amount to about $2 billion in 2000, similar to estimated disbursals in 1998 and 1999 (see lower table). However, the amount could go higher following commitments from donors at a conference in Brussels, March 29–30, to finance a number of selected quick-start regional projects.
|Real GDP growth|
|Bosnia and Herzegovina||12.4||10.0||15.0|
|FYR of Macedonia||2.9||2.7||6.0|
|Average (weighted by countries’ GDP)||-0.5||-0.2||3.5|
|(percent; end of period)|
|Bosnia and Herzegovina||10.0||5.0||3.0|
|Average (weighted by countries’ GDP)||21.7||26.5||13.7|
|(percent of GDP)|
|Current account balances|
|Bosnia and Herzegovina||-26.8||-17.4||-16.6|
|Average, weighted by countries’ GDP||-7.1||-5.7||-5.5|
|(billion U.S. dollars)|
|Required regional financing from||3.2||3.4||4.4|
|Project financing by official creditors1||2.0||1.9||2.1|
|Balance of payments and/or budget support2||1.2||1.5||2.3|
|IMF financing, net3||0.0||0.1||0.4|
IMF relations with the region
Albania is in the second year of a three-year program supported by an arrangement under the Poverty Reduction and Growth Facility (PRGF). The program is on track. The macroeconomic strategy emphasizes fiscal consolidation through strengthening tax revenues, and the structural reform priorities are bank and enterprise privatization. In March, an IMF mission conducted the final review of the second-year arrangement and discussed policies for a third-year program. The authorities are preparing an interim poverty reduction strategy paper that will set out their plans to reduce poverty in Albania.
Bosnia and Herzegovina has had a Stand-By Arrangement with the IMF since May 1998. At the end of March, the second and third reviews of the arrangement were completed, and the arrangement was extended to March 2001. Macroeconomic stabilization continues to rely on a successful currency board arrangement as well as on fiscal adjustment. Progress in the structural area has been hesitant, however, and an acceleration of reforms, particularly in enterprise privatization, will be key to maintaining broad-based and rapid growth.
In Bulgaria, an Extended Fund Facility arrangement is on track, with the third program review completed at the end of March 2000. It is supporting an adjustment and reform program designed to run from July 1998 to June 2001. The authorities remain fully committed to their currency board arrangement, which is underpinned by prudent fiscal and incomes policies and has provided the impetus for wide-ranging structural reform. Economic activity is also strengthening. IMF staff have reached understandings with the authorities on policies for 2000.
Croatia’s inoperative Extended Fund Facility arrangement expired in March 2000. The authorities have requested discussions on a Stand-By Arrangement. A program in support of a Stand-By Arrangement would be expected to include, among other things, resolute fiscal retrenchment and structural reforms—notably, further privatization and restructuring of the health care and pension systems. If there were early agreement on a program, a 12- or 18-month Stand-By Arrangement could be in place by midyear.
In FYR Macedonia, the IMF does not currently have an active program. Progress in discussions on a three-year program, supported by a mix of funding from the PRGF and the IMF’s General Resources Account, will require the authorities’ strong commitment to structural reforms—particularly to enterprise privatization.
Romania’s Stand-By Arrangement, approved in August 1999, focuses on continued fiscal consolidation and the restructuring and privatization of banks and enterprises. Performance under the arrangement has generally been good, although completion of the review, originally due by late October 1999, has been considerably delayed, most recently by the need to agree on a program for 2000. At the end of March, the IMF’s Executive Board approved a two-month technical extension of the arrangement—which was due to expire—to provide time to complete the review and reach agreement on a further extension of it to the end of February 2001.
Under the terms of United Nations (UN) Security Council Resolution No.1244, IMF staff are continuing to provide technical assistance to the interim UN administration in Kosovo, albeit on a diminished scale now that budgetary and payments systems are successfully in place. IMF staff are also monitoring budgetary policies and developments. The IMF does not have regular relations with Kosovo, which is a province of the Federal Republic of Yugoslavia, a nonmember country.
IMF invites comments on textbook on national accounts compilation
There has been increasing interest in the compilation of quarterly national accounts in many countries for economic monitoring and analysis. Based on training seminars and technical assistance provided by the IMF in several countries, a draft textbook on quarterly national accounts has been prepared. The underlying concepts are the same as the annual accounts and follow the System of National Accounts 1993; however, a number of practical and theoretical issues become more prominent in quarterly compilation. The textbook has been designed for national accounts compilers who have experience in annual compilation and wish to develop quarterly estimates, as well as those already working on quarterly estimates who wish to consider improvements to existing systems.
The IMF is inviting comments on the draft textbook to be made by June 21, 2000. The textbook would be finalized shortly thereafter. Comments on the draft are most welcome. They may be sent by e-mail (
The full text of the IMF report on southeast Europe is available on the IMF’s website (