EU Funded Projectimplemented by Support to IFI Coordination in the Western Balkans and Turkey 26 February 2014 Social Sector Expenditure in the Western Balkans RCC Conference What Kind of Social Agenda for the Western Balkans? Mary OMahony

2 Objectives of Presentation oScene setter for presentations to follow oCompare expenditure trends among different WB countries oCompare social expenditure levels in the WB to those of the EU countries oOutline the social sector priorities identified by governments in recent Economic and Fiscal Programmes

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

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

WB Expenditure by Economic Classification: Wage Bill 5 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)

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

WB Expenditure by Economic Classification: Social Transfers 7 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)

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

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

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

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

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

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

14 EFPs – Social Sector Priorities oFYR Macedonia: Capital investments in education, child care and social protection. Simplification of social benefits system and focus on labour market reform oMontenegro: Reforms in labour market, education, social protection and health sector. Use of PPPs to facilitate capital investments oSerbia: 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 oStalled economic growth oNeed to generate socio-economic development oImprove labour skills, increase productivity, higher value added products and services oIncreased social needs, social inclusion issues oPressure for reform of health, education & social protection systems oAlignment to EU/international norms oFinancing sources for capital expenditure

EU Funded Projectimplemented by Support to IFI Coordination in the Western Balkans and Turkey 26 February Thank you for your attention!