Markets

CAPITAL Tirana
POPULATION (MILLION) 2,9
GDP (CURRENT USD BILLION) 15,8
GDP PER CAPITA (CURRENT USD) 5,2
LIFE EXPECTANCY (YEARS) 78.5

HISTORY

Albania declared its independence from the Ottoman Empire in 1912, but was conquered by Italy in 1939 and occupied by Germany in 1943. Communist partisans took over the country in 1944. Albania allied itself first with the USSR (until 1960), and then with China (to 1978). In the early 1990s, Albania ended 46 years of isolated communist rule and established a multiparty democracy.

Albania joined NATO in April 2009 and in June 2014 became an EU candidate. Albania in April 2017 received a European Commission recommendation to open EU accession negotiations following the passage of historic EU-mandated justice reforms in 2016.

MACROECONOMIC ENVIRONMENT

The transition from a centrally planned to a market-oriented economy, together with abundant international aid and other strategic assistance over the past decades, has helped Albania to make economic progress. Due to strong growth performance, Albania grew from the poorest nation in Europe in the early 1990s to middle-income status in 2008, with poverty declining by half during that period.

However, close trade, remittance, and banking sector ties with Greece and Italy make Albania vulnerable to spillover effects of possible debt crises and weak growth in the eurozone. Remittances, a significant catalyst for economic growth, declined from 12-15% of GDP before the 2008 financial crisis to 5.8% of GDP in 2015, mostly from Albanians residing in Greece and Italy. The agricultural sector, which accounts for more than 40% of employment but less than one quarter of GDP, is limited primarily to small family operations and subsistence farming, because of a lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land.

Inward foreign direct investment has increased significantly in recent years as the government has embarked on an ambitious program to improve the business climate through fiscal and legislative reforms since 2015. The government is focused on the simplification of licensing requirements and tax codes, and it entered into a new arrangement with the IMF for additional financial and technical support. Albania’s three-year IMF program, an extended fund facility arrangement, was successfully concluded in February 2017. The Albanian Government has strengthened tax collection amid moderate public wage and pension increases in an effort to reduce its budget deficit. The country continues to face high public debt, exceeding its former statutory limit of 60% of GDP in 2013 and reaching 72% in 2016.

LABOR MARKET

Agriculture is an important economic sector for the Albanian economy. It contributes 18.4% of the GDP and employs 38% of the workforce (World Bank, 2019). Agricultural production concentrates on wheat, corn, oats, potatoes, vegetables, olives, tobacco, fruits, sugar beets, vines, livestock farming and dairy products. The agriculture sector in Albania suffers from a lack of modern equipment, highly fragmented land ownership and limited area of cultivation, all of which lead to a relatively low productivity. Only 24% of its territory is classified as agricultural land while 76% is non-arable land (of which 6% are forests; source: FAO).

The industrial sector accounts for 21.3% of the country’s GDP and employs 19% of the active population. The sector is concentrated on food processing, textiles and clothing, timber work (construction), oil, cement, chemical products, mining, transport and hydraulic energy. The manufacturing sector’s value added is estimated to contribute to nearly 6% of the country’s GDP (World Bank).

The services sector represents 47.9% of the GDP, employing 43% of the workforce. The tourism, telephony, banking and insurance sectors are all booming. According to a report by the World Travel & Tourism Council (WTTC), travel and tourism receipts in 2018 represented 27.3% of GDP.

BANKING SYSTEM

The banking sector is regulated by Law 9662, “On Banks in the Republic of Albania.” The law defines guidelines to ensure sound management and administrative procedures for domestic and foreign banks.

Following the trends observed through the European economies and the large share of banks owned by European banks, financial consolidation in Albania has led to a reduction in depository financial institutions. The number of banks declined to 14 in 2018 due to the acquisition of two foreign subsidiaries in the Albanian banking system. The acquisition of the two banks followed similar developments of parent companies located in the euro area. As a result, the number of banks with foreign-owned capital has declined to 11 banks, of which seven banks are owned by financial institutions or agents located in the euro area. The capital of the three banks is owned by domestic agents. The share of total bank assets held by the 11 banks with foreign capital stands at 78%.

With the decline in the number of banks, the size of the banking system has slightly changed. The total number of bank branches or agencies operating across the country was 447 in 2018, a slight decline from 473 branches in 2017. In addition, the relative size of total bank assets in terms of GDP slightly declined to 96.8%, compared to 99.4% in 2017.

Despite the smaller number of banks, the financial activity of the banking sector has continued to grow with a moderate positive trend. The currency composition of deposits and loans held by the banks in Albania and the changes in exchange rate mask these positive trends. By the end of 2018, around 53% of bank deposits and around 51% of bank loans to the private sector were denominated in a foreign currency. When bank assets are accounted by with a fixed exchange rate, the total assets of the banking system expanded by 1.9%. Nevertheless, the sharp appreciation of the domestic currency to 123.4 Lek/€ (from 133 Lek/€ in 2017) and the high share of loans and deposits denominated in foreign currencies have led to a slight decline in total bank assets when measured in domestic currency by 0.7%.

Banking activity measured by total bank deposits expanded by 3%, after accounting for changes in exchange rate. Whilst total lending has seen a moderate decline, owning to the cutting down on lending to non-residents and to financial institutions, lending to the private non-financial sector has expanded.

The total loans to the non-financial (non-public) corporate sector and to households increased by 3%, mainly due to the expansion of credit to the latter. The sharp appreciation of currency in 2018 has masked some of these moderate trends owning to the direct accounting effects.

The financial soundness of the banking system has improved, in terms of capitalisation, asset quality and liquidity. Regulatory capital to risk weighted assets has continued the upward trend, observed in the previous two years, reaching 18.2%. Similarly, the liquidity position of the banking system has continued to improve as liquid assets to total assets reached 34.2% in 2018, up from 26% in 2010. The ratio of non-performing loans to total loans further declined to 11% in 2018, a decline of two percentage points compared to the previous year, and much lower than the peak of 23.5% observed in 2013.

Compared to the banking sector, the non-bank financial institutions account for a small fraction of the financial system when measured by asset size. Currently, there are 30 non-bank financial institutions and 13 savings and credit institutions. Despite the large number, their financial activity is relatively small. The total assets of non-bank financial institutions account for around 3.9% of GDP as of 2018.

HEALTHCARE

The healthcare system in Albania is mainly public, while private practice is limited to a small niche market sector. The Albanian law guarantees equal access to healthcare for all citizens. Public healthcare in Albania is the major provider of health services, health promotion, prevention, diagnosis and treatments for the population of Albania. Primarily, the Government of Albania funds the State healthcare system. Other sources of funding include contributions from eligible employers, employees and the self-employed, a certain percentage of their wages or income are deducted and contributed to the insurance scheme. However, poverty in Albania is rather common, and only a few people can afford to make such contributions.

SOURCES:

http://pubdocs.worldbank.org/en/175921539205307971/Albania-Snapshot-Oct2018.pdf

https://santandertrade.com/en/portal/analyse-markets/albania/economic-outline

https://www.ebf.eu/albania/https://www.pacificprime.com/country/europe/albania-health-insurance-pacific-prime

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CAPITAL Sarajevo
POPULATION (MILLION) (2016) 3,3
GDP (CURRENT USD BILLION) (2017) 18,17
GDP PER CAPITA (CURRENT USD) (2017) 4,409
LIFE EXPECTANCY (YEARS) (2015) 77,13

HISTORY AND POLITICS

Bosnia and Herzegovina (BiH) declared sovereignty in October 1991 and independence from the former Yugoslavia after the referendum held from February 29 to March 1, 1992.  The referendum was boycotted by a part of the Bosnian Serbs, leding to an armed conflict, which lasted until December 14, 1995. 

On 21 November 1995, in Dayton, Ohio, the warring parties initiated a peace agreement that ended three years of interethnic civil strife (the final agreement was signed in Paris on 14 December 1995). 

The Dayton Peace Accords retained Bosnia and Herzegovina’s international boundaries and created a multiethnic and democratic government charged with conducting foreign, diplomatic, and fiscal policy. Also recognized was a second tier of government composed of two entities roughly equal in size: Federation of Bosnia and Herzegovina (51% of the territory) and the Republika Srpska (49% of the territory) and one municipality that does not belong to any of the entities – Brčko District.The Federation and RS governments are responsible for overseeing most government functions.

Additionally, the Dayton Accords established the Office of the High Representative to oversee the implementation of the civilian aspects of the agreement. The Peace Implementation Council at its conference in Bonn in 1997 also gave the High Representative the authority to impose legislation and remove officials, the so-called “Bonn Powers.” An original NATO-led international peacekeeping force (IFOR) of 60,000 troops assembled in 1995 was succeeded over time by a smaller, NATO-led Stabilization Force (SFOR). In 2004, European Union peacekeeping troops (EUFOR) replaced SFOR. Currently, EUFOR deploys around 600 troops in theater in a security assistance and training capacity.

MACROECONOMIC ENVIRONMENT

Bosnia and Herzegovina’s economy has been driven by postwar reconstruction. Trade is an engine of growth, but the overall entrepreneurial environment remains one of the region’s most burdensome, hindering the emergence of a dynamic private sector. The highly decentralized government hampers policy coordination and reform, while excessive bureaucracy, weak rule of law, and market segmentation discourage foreign investment. Public perceptions of government corruption and misuse of taxpayer money motivate many to remain in the large informal economy.

Bosnia and Herzegovina’s private sector is growing slowly, but foreign investment dropped sharply after 2007 and remains low. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a steady source of revenue for the government and helped rein in gray-market activity, though public perceptions of government corruption and misuse of taxpayer money has encouraged a large informal economy to persist. National-level statistics have improved over time, but a large share of economic activity remains unofficial and unrecorded.

The combined value of exports and imports is equal to 86.9 percent of GDP. The average applied tariff rate is 1.2 percent. The government’s official policy is to treat foreign and domestic investors equally under the law. 

Increasing macroeconomic stability, low inflation rates (below 1% in each of the past three years) and fiscal consolidation have had a positive impact, both in overall terms and on net foreign direct investment, which increased from €161.1 million (3.2% of GDP) in 2000 to €344.4 million (5.2% of GDP) in 2004. However, two risk factors from a macroeconomic point of view remain to be addressed, namely the high level of public expenditure (reaching 46% of GDP in 2003) and external imbalances. Trade liberalisation, in particular with the (Southeast) European region, has opened up the economy but has resulted in a rapid growth in imports rather than exports. In fact, except for a few niche sectors, the export performance of Bosnia and Herzegovina has largely failed to respond to the new market conditions. Consequently the trade deficit has risen to around 35% of GDP during the past four years, mainly because of remittances.

LABOR MARKET

The process of change in Bosnia and Herzegovina has been slower and more painful than in most other transition countries. As a result, several distortions have been created. In the absence of significant new opportunities, workers with formal employment contracts in old enterprises cling to their workplaces, even if the jobs are unpaid and offer no long-term prospects. Many others have been caught in the middle of this slow transition and are performing different temporary jobs when opportunities arise, often in the informal economy. The Labour Market in BiH is characterized by a high share of informal employment as well as high inactivity level of the working age population. There is a decreasing trend in the number of the unemployed while the labour demand is still lower than in the pre-recession period. In addition to being extremely high, what particularly causes concern is that the unemployment rate is mostly long-term, accompanied by an extremely high inactivity rate of the BiH population.

The European Union and other donors have invested significant funds in Bosnia and Herzegovina in building the capacities of local stakeholders so that they can effectively address a wide range of local labour market needs. Now these capacities need to be put to use in an intervention that adopts a local economic development approach through supporting Local Employment Partnerships (LEPs).

The implementation of new labor laws in both BiH entities, and continuation of support schemes for first-time job seekers are expected to improve labor markets outcomes in the coming years, hence also supporting poverty reduction.

BANKING SYSTEM

The banking sector in Bosnia and Herzegovina is regulated by Entity Banking Laws, which are largely harmonized, regulating the establishment, operation, management and supervision of commercial banks in Bosnia and Herzegovina. The Central Bank of Bosnia and Herzegovina (CBBH) has a coordinating role in banking supervision, which is realized through cooperation with the Banking agency and is based on regular exchange of information and consultations on the banking sector and on financial stability issues. In June 2009, in order to support the banking system in the domestic economy The Memorandum of Understanding, under the name of “Vienna Initiative”, was signed in Vienna with representatives of six-banking groups (Raiffeisen International, Hypo Alpe Adria, UniCredit Bank Austria, Volksbank International, Intesa Sanpaolo International, NLB group) operating in Bosnia and Herzegovina. They have agreed that these banks in BiH will keep the level of exposure and continue their activities as they did before the financial crisis. In 2009, the banking sector in BiH, in addition to the pronounced consequences of the global economic crisis, managed to maintain stability and successfully respond to customer requirements, thus maintaining confidence in the banking system. The consequences of the global financial crisis of 2008 and 2009 were manifested through the withdrawal of deposits in foreign currencies and through the conversion of cash and deposits in domestic currency into cash in foreign currencies. This outburst jeopardized the banking sector’s liquidity, so the CBBH undertook a series of measures to help banks solve the liquidity problem. Another consequence of the economic downturn in the banking sector is the employment reduction.

HEALTHCARE

System structure Health care system in Bosnia and Herzegovina is characterized by extreme fragmentation considering the fact that the system is organized in various ways in the Federation of BiH, Republika Srpska and Brčko District. In terms of the organizational structure and management, this system operates through 13 completely different subsystems at the level of entities, cantons and Brčko District, which significantly complicates the way health care services are provided, increases management and coordination costs and adversely affects the rationality of management of healthcare institutions, primarily through the prism of untapped opportunities of economy of scope.

Under the public healthcare system of Bosnia, a Federal Health Insurance Fund was set up to control and supervise the mandatory insurance funds collected in the health departments. Each of the 10 departments collects contributions for the central health insurance fund. The Government of Bosnia is the main contributor, who contributes about 54% to the insurance fund. Their contribution is to support the unemployed, pensioners and any vulnerable groups. Other groups in Bosnia who contribute towards the insurance fund include 30% from employers and employees and 16% from the taxation on incomes of farmers. Extra funding is received from patients paying for part of their medical treatments costs and for their medications.

Primary healthcare in Bosnia is provided through health centres and health stations (known as ambulantas). Health Centres are owned by the municipal Governments, and they provide primary health care, preventive healthcare, health education, and rehabilitation. Some of the medical services that health centres provide include general practice, maternity care, child healthcare, and dental care. Health centres are staffed with general practitioners and nurses. Ambulantas are outpatient clinics, which are staffed with general practitioners (GP), specialist doctors, dentists, and community health nurses. 

SOCIAL WELFARE

The existing social assistance system produces inequalities among its users based on their place of residence (territorial inequalities) and based upon the social category to which the user belongs (status-based, i.e. category-based inequalities). Apart from significant criteria-based differences, the volume and profusion of social benefits among entities, inequalities which are a result of differently regulated social assistance systems on the cantonal level in FBiH represent a specific problem. As the amounts for permanent financial assistance for families vary between cantons, certain social services do not exist in some of them. The inequalities between different categories of social as the problem of insufficient coordination and integration of social policies with labor market policies, i.e. the insufficiently developed activation component of social measures, is what is largely neglected in present discussions on disadvantages and possible social protection system reforms.

SOURCES:

https://www.sarajevotimes.com/137151-2/
https://www.fes-bosnia-and-herzegovina.org/fileadmin/user_upload/documents/sistem_zdravstvene_zastite_-_eng_-_2018_2_13_web.pdf
https://www.pacificprime.com/country/europe/bosnia-health-insurance-pacific-prime-international/#:~:text=The%20State%20healthcare%20system%20in,secondary%20healthcare%20of%20the%20country.&text=The%20Government%20of%20Bosnia%20is,54%25%20to%20the%20insurance%20fund.

CAPITAL Sofia
POPULATION (MILLION) 6,9
GDP (CURRENT USD BILLION) 15,8
GDP PER CAPITA (CURRENT USD) 5,2
LIFE EXPECTANCY (YEARS) 78,5

HISTORY AND POLITICS

The Bulgars, a Central Asian Turkic tribe, merged with the local Slavic inhabitants in the late 7th century to form the first Bulgarian state. In succeeding centuries, Bulgaria struggled with the Byzantine Empire to assert its place in the Balkans, but by the end of the 14th century the country was overrun by the Ottoman Turks. Northern Bulgaria attained autonomy in 1878 and all of Bulgaria became independent from the Ottoman Empire in 1908. Having fought on the losing side in both World Wars, Bulgaria fell within the Soviet sphere of influence and became a People’s Republic in 1946. Communist domination ended in 1990, when Bulgaria held its first multiparty election since World War II and began the contentious process of moving toward political democracy and a market economy while combating inflation, unemployment, corruption, and crime. The country joined NATO in 2004 and the EU in 2007.

LABOR MARKET

Bulgaria has undergone a significant transformation over the past three decades. It has changed from a highly centralized, planned economy to an open, market-based, upper-middle-income country securely anchored in the European Union (EU). In its initial transition, Bulgaria went through a decade of slow economic restructuring and growth, high indebtedness, and a loss of savings.

However, the advancement of structural reforms starting in the late 1990s, the introduction of the currency board, and expectations of EU accession unleashed a decade of exceptionally high economic growth and improved living standards.

Yet, a number of legacies from that early period, the global economic crisis of 2008, and a period of political instability in 2013-14 undid some of those gains.

In 2019, trends on the labour market remained positive against the backdrop of stronger consumer confidence and higher household savings. Data from the Labour Force Survey conducted by the National Statistical Institute (NSI) indicates that in Q3 2019 there was an increase in labour supply measured through the size of the workforce. At the same time, economic activity reached a historical high, attributable to the continually growing number of workers and employees and the trend of continual decline in the working-age population.

Administrative statistical data of the Employment Agency indicates a significant drop in the unemployment rate in December 2019 as compared to December 2018. The average monthly number of unemployed persons in Bulgaria in the period January-December 2019 stood at 185 266 (a decrease of 17 728 persons compared to the previous year).

BANKING SYSTEM

Driven by private consumption and business investments, in 2018 Bulgarian GDP recorded slower real growth of 3.1% compared to 3.8% in 2017. Nevertheless, the economic growth in Bulgaria was above the average for the EU economy for the fourth successive year.

In 2018 the unemployment rate declined to the historically low level of 5.2%. Mainly due to price changes in the energy resources and higher internal demand, the average annual change of HICP in Bulgaria increased to 2.6% in 2018 compared to 1.2% in 2017.

The favourable state of the Bulgarian economy, characterised by low unemployment, increasing incomes, stable fiscal position and the lack of excessive imbalances had a positive impact on the Bulgarian banking sector. It was also marked by several tendencies: consolidation processes, increasing growth in deposits, continuing increase in lending accompanied by higher revenues, decrease in non-performing loans (NPLs) and growing digital challenges.

At the end of 2018, there were 25 banks operating in Bulgaria, five of which were foreign bank branches. The top five banks held approximately 59.4% of all assets in the banking system. At the end of 2018 the market share of domestic banks was 22% and the share of EU subsidiaries was 72.1%. The number of banks is constantly decreasing due to the consolidation processes taking place in the sector.

In 2018 banks’ total assets increased by 7.9% year-on-year to €54 billion (BGN 105.6 billion). The share of loans and advances increased to 63.3% compared to 61% at the end of December 2017. The share of cash dropped to 19.3% from 19.9% and the share of securities decreased to 12.9% from 14.3%.

The loan portfolio of the banking system grew at a moderate pace due to the favourable economic environment, low interest rates, competition and higher loan demand. According to the BNB’s interest rate statistics, average interest rates on new deposits remained low in all sectors and currencies in 2018, and interest rates on loans declined compared to the previous year.

The total amount of loans outstanding to the non-government sector (non-financial corporations and households), rose to €27.87 billion (BGN 54.51 billion) from €25.87 billion (BGN 50.63 billion), according to the BNB monetary statistics. In the last year the outstanding loans to non-financial corporations, including small and medium-sized enterprises (SMEs), which represent 99.9% of all enterprises in the country, increased by 5.4%, reaching €16.7 billion (BGN 32.69 billion). By sectors, the highest amount of loans and deposits were in the trade, manufacturing, construction and real estate industries.

Deposits held by banks grew by 7.3% in 2018 and reached €39.7 billion (BGN 77.66 billion), or 72% of GDP, despite the low interest rate levels. Approximately two thirds of the deposits were held by the household sector (66.4%).

The banks have used the favourable momentum to clean their loan portfolios intensively as evidenced by the decline in the share and the amount of NPLs. As of 31 December 2018, the amount of NPLs (excluding central banks and credit Institutions) dropped to €2.3 billion (BGN 4.54 billion) in absolute terms, or to 7.5%. Although the level of NPLs is still above the EU average, the higher level of coverage for gross non-performing loans by provisions compared with the average level of the EU countries is typical for the Bulgarian banking system.

The higher credit growth, accompanied by increased revenues from payment services, the better quality of the loan portfolio, the lower impairments, the declining interest rates and some one-off effects influenced the financial result of the sector for 2018 as the adjusted net profit of the system grew by 12% to €736 million (BGN 1.44 billion). Adjusted net interest income decreased by 0.6% to €1.36 billion (BGN 2.66 billion) despite the increase in lending. The adjusted net income from fees and commissions increased by 4% to €530 million (BGN 1.04 billion).

The capital position of the banking sector continued to be marked by a significant capital surplus above the regulatory requirements for the capital adequacy and leverage ratios, at a system and local level, as well as in comparison with the average levels of European banks. At the end of 2018, CET 1 for the whole banking system was 18.99% and the total capital adequacy was 20.38%. The Liquidity coverage ratio stood at 294.1%. In 2018, return on assets increased to 1.6% from 1.2% and return on equity grew to 12.1% from 9.3% a year ago.

HEALTHCARE

General healthcare in Bulgaria varies. In the cities, major hospitals boast plentiful, professional, qualified staff, clean modern wards and the latest technology, achieving standards that will be familiar to European visitors. In more rural areas, however, you may have to travel a considerable distance for the privilege of staying in a grim, Soviet era clinic, where your friends and family will be expected to make your bed and prepare your food.

Bulgarian healthcare is universal and state funded through the National Health Insurance Fund. Bulgaria spends around 4.2% of its GDP on healthcare and has around 1.8 doctors per 1,000 people, which is above the EU average.  However, a legacy of poor healthcare funding over decades in the Eastern Bloc means that life expectancy is well below the EU average, at just 76 for women and under 70 for men.

The private healthcare sector however, sits in stark contrast to the overall picture. Many doctors and dentists turned private with the introduction of the free market following the fall of communism, leading to a glut of private practices. This meant that clinics had to invest in better technology and provide better staff training and service in order to gain a competitive edge in a crowded market. At the same time, a low wage economy forced them to keep their prices down.

There is a wide choice of healthcare tourism options in Bulgaria, with many quality dental clinics springing up around the major tourist centres and medical and cosmetic surgery clinics appearing at many of the country’s famous spa sites. And the industry is growing and improving all the time, with the Bulgarian Union for Spa Tourism estimating that no less than $5.4billion has been invested across the sector in recent years.

SOCIAL WELFARE

Bulgarian welfare system was significantly changed in the late 1990’s and early 2000’s following the whole economic and political changes since the collapse of communist system. 

One of the fundamental changes that were introduced in 1998 was the implementation of a Currency Board system that was used to fix the exchange rate of Bulgarian lev to the German mark (later to euro) and total abolishment of discretionary monetary policy. The profound character of this reform marked most of the policy measures undertaken in the following years in the country’s economy and in the social security system as an inseparable part of it. The strong discipline effect of Currency Board exerts on the government and the central bank made possible the implementation of difficult but needed reforms concerning privatization of state assets, taxation, and changes in the social sphere, especially in the pension system.

All changes that were made at the beginning of the new century were consistent with the regulations of the European Union. Unfortunately some of the reforms were delayed in time; others have not been introduced yet, some others have been stopped. For example in 2011 the ruling party adopted a regulation that stipulated a gradual increase both in pension age and contributory service required for retirement. As a result the age for receiving pension benefits was planned to increase by 4 months each year until it reaches 65 years for men and 63 years for women.

In early 2000’s new legislation was adopted in the employment policy and as a result a special fund was established. The so called unemployment fund, together with the pension fund, the employment injury and occupational diseases fund and the common disease and maternity fund have formed the first pillar of the Bulgarian social security system. Each of these funds has its own budget. All of them are financed by special contributions that are paid by all working individuals and their employers and the resources are used on a solidarity basis. The contributory rate for the unemployment fund has been changed several times after 2000.

SOURCES:
https://ec.europa.eu/eures/main.jsp?catId=9366&acro=lmi&lang=en&countryId=BG&regionId=BG0&nuts2Code=null&nuts3Code=null&regionName=National%20Level
https://www.worldbank.org/en/country/bulgaria/overview
https://www.cia.gov/library/publications/resources/the-world-factbook/geos/bu.html
https://www.ebf.eu/bulgaria/
https://www.treatmentabroad.com/destinations/bulgaria/healthcare-system-bulgaria
https://ideas.repec.org/p/pra/mprapa/62039.html
https://mpra.ub.uni-muenchen.de/62039/1/MPRA_paper_62039.pdf

CAPITAL Chisinau
POPULATION (MILLION) 3,4
GDP (CURRENT USD BILLION) 11,9
GDP PER CAPITA (CURRENT USD) 6,7
LIFE EXPECTANCY (YEARS) 71,72

HISTORY

A large portion of present day Moldovan territory became a province of the Russian Empire in 1812 and then unified with Romania in 1918 in the aftermath of World War I. This territory was then incorporated into the Soviet Union at the close of World War II. Although Moldova has been independent from the Soviet Union since 1991, Russian forces have remained on Moldovan territory east of the Nistru River supporting the breakaway region of Transnistria, whose population is roughly equally composed of ethnic Ukrainians, Russians, and Moldovans.

MACROECONOMIC ENVIRONMENT

With few natural energy resources, Moldova imports almost all of its energy supplies from Russia and Ukraine. In 2018, Moldova awarded a tender to Romanian Transgaz to construct a pipeline connecting Ungheni to Chisinau, bringing the gas to Moldovan population centers. Moldova also seeks to connect with the European power grid by 2022.

The government’s stated goal of EU integration has resulted in some market-oriented progress. Moldova experienced better than expected economic growth in 2017, largely driven by increased consumption, increased revenue from agricultural exports, and improved tax collection.

During fall 2014, Moldova signed an Association Agreement and a Deep and Comprehensive Free Trade Agreement with the EU (AA/DCFTA), connecting Moldovan products to the world’s largest market. The EU AA/DCFTA has contributed to significant growth in Moldova’s exports to the EU. In 2017, the EU purchased over 65% of Moldova’s exports, a major change from 20 years previously when the Commonwealth of Independent States (CIS) received over 69% of Moldova’s exports. A USD1 billion asset-stripping heist of Moldovan banks in late 2014 delivered a significant shock to the economy in 2015; the subsequent bank bailout increased inflationary pressures and contributed to the depreciation of the leu and a minor recession.

The government’s push to restore stability and implement meaningful reform led to the approval in 2016 of a USD179 million three-year IMF program focused on improving the banking and fiscal environments, along with additional assistance programs from the EU, World Bank, and Romania. Moldova received two IMF tranches in 2017, totalling over USD42.5 million.

Economic growth in 2019 ended at 3.6 percent, driven by investment and private consumption that was supported by remittances, higher wages, and social benefits during the election cycle. The economy is, however, facing a recession in 2020 due to the COVID-10 pandemic. After the declaration of a state of emergency in mid-March, several measures have been taken to contain the crisis’s impact. Mitigating the impact of the crisis will require prioritizing health-related interventions, as well as supporting the unemployed and businesses.

BANKING SYSTEM

Moldova’s banking system was set up in two tiers in 1991 around the time of the breakup of the USSR. The National Bank of Moldova licenses, supervises, and regulates the activity of financial institutions.

At the end of 2018, 11 banks licensed by the National Bank of Moldova operated in the Republic of Moldova. In accordance with the banking supervision priorities and the commitments assumed towards the development partners in strengthening the transparency of the shareholders’ structure for the banks, significant changes, related to the acquisition of shares in the capital of certain banks by several reputable international groups, were made in 2018. As a result, more than 70% of bank assets are being managed by international groups with a sound reputation.

In contrast to the West, banks still play a minor role in the country’s economic development and business activity. Moldova’s high credit risk and inflation rates determine the high interest rates on limited bank loans. A persistent problem in the banking system is the insufficiency of funds with longer tenors. The population often opens deposits for periods less than 12 months. Loans and state treasury bills provide limited diversification for the banks’ assets because Moldova’s stock market remains underdeveloped and provides limited options for long-term investments. As a result, banks have to rely on long-term credit lines from the World Bank, the European Bank for Reconstruction and Development, and other international financial institutions to lend long term.

Foreign investors’ share in Moldovan banks’ capital is around 81%, although ultimate beneficial ownership and lack of clarity calls that statistic into question. A crisis at three Moldovan banks, two of them being among the country’s top five, in late 2014 called into question the soundness of the banking system, which has yet to recover from the fallout. Authorities responded by strengthening the independence of the regulating bodies and enhancing the tracking of bank shares. 

Law on banks’ activity, which modernised the regulation and supervision standards in the banking sector, came into force on 1 January 2018. The law provided improvements to the corporate governance framework of the banks and their obligation to hold adequate share capital in relation to the assumed risks. The law will contribute to the harmonisation process of the national banking legislation with international principles and standards.

HEALTHCARE

In 2017, there were 36,7 doctors and 69,2 medical staff per 10 000 inhabitants. Compared to previous years there is a reduction in the number of beds, per 10 000 inhabitants there were 52 beds.

Most often, the population suffers from respiratory diseases, complications of pregnancy, traumatic injuries and poisonings. Despite rising budgetary spending, public health care remains extremely under-financed. Consequently, the mortality rate of the working-age population and private expenditure on health care remain among the highest in the European region of WHO.

SOCIAL WELFARE

The efficiency of the Moldovan social assistance system is still very limited due to the bad financial condition of the country. Additionally, there is no equal distribution of welfare. Some citizens (judges, civil servants, members of parliament) are privileged with special pension terms such as lower retirement age. Proper targeting of assistance also remains a problem.

In 2017, a pension reform was initiated. Since then, the retirement age has gradually increased each year. The retirement age was intended to reach 63 years in 2019 for men and 2028 for women. Prior to the reform, men retired at the age of 62 and women at the age of 57. In the second half of 2018, average pensions increased in comparison to January 2016 by 43% and amounted to $97 per month, finally exceeding the Moldovan subsistence minimum ($91.5 per month). However, pensions for various officials (e.g., judges) increased disproportionately to people working in the private sector. The average unemployment benefit was also raised and currently matches the average pension payment.

Legal improvements notwithstanding, inequality in Moldova remains relatively high. Although women represent 52% of the population, they remain underrepresented in public offices and businesses. In 2018, women accounted for only a little more than 20% of the total number of members of parliament.

SOURCES:

https://www.worldbank.org/en/country/moldova/overview
https://www.export.gov/article?id=Moldova-Banking-Systems
https://www.cia.gov/library/publications/the-world-factbook/geos/md.html
http://www.statistica.md/public/files/publicatii_electronice/Moldova_in_cifre/2018/Breviar_en_2018.pdf
https://www.ebf.eu/moldova/
https://www.bti-project.org/en/reports/country-report-MDA-2020.html#pos13

CAPITAL Skopje
POPULATION (MILLION) 2,1
GDP (CURRENT USD BILLION) 12,69
GDP PER CAPITA (CURRENT USD) 6,08
LIFE EXPECTANCY (YEARS) 75,59

HISTORY

Macedonia gained its independence peacefully from Yugoslavia in 1991. Although Macedonia became an EU candidate in 2005, it has not opened accession negotiations. The country still faces challenges, including fully implementing reforms to overcome a decade of democratic backsliding and stimulating economic growth and development. In June 2018, Macedonia and Greece signed the Prespa Accord whereby the Republic of Macedonia agreed to change its name to the Republic of North Macedonia. Following ratification by both countries, the agreement went into force on 12th February 2019. North Macedonia signed an accession protocol to become a NATO member state in February 2019 and joined the alliance 27.03.20. The negotiations for becoming an EU memeber are likely to begin in Fall 2020.

Politics in North Macedonia occur within the framework of a parliamentary representative democratic republic, whereby the Prime Minister is the head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and parliament. The Judiciary is independent of the executive and the legislature. 

MACROECONOMIC ENVIRONMENT

Since its independence in 1991, Macedonia has made progress in liberalizing its economy and improving its business environment. Its low tax rates and free economic zones have helped to attract foreign investment, which is still low relative to the rest of Europe. Corruption and weak rule of law remain significant problems.

Macedonia is working to build a country-wide natural gas pipeline and distribution network. Currently, Macedonia receives its small natural gas supplies from Russia via Bulgaria. In 2016, Macedonia signed a memorandum of understanding with Greece to build an interconnector that could connect to the Trans Adriatic Pipeline that will traverse the region once complete, or to an LNG import terminal in Greece.

Macedonia maintained macroeconomic stability through the global financial crisis by conducting prudent monetary policy, which keeps the domestic currency pegged to the euro, and inflation at a low level. However, the internal political crisis has hampered economic performance, with GDP growth slowing in 2016 and 2017, and both domestic private and public investments declining.

In 2019, the public debt was 59,5% of GDP and the State debt 50,7%.

LABOR MARKET

Unemployment eased in 2016 and early 2017, helped by public investment and employment programs, but labor force participation fell to its lowest since 2012. Public investment in infrastructure should sustain employment creation. Poverty is expected to continue to decline, propelled by job creation.

Employment grew 2.5% year-on-year (y-o-y) in 2016 and 2.7% in the first half of 2017. A large share of the newly created jobs are linked to employment programs in trade, transport services, and manufacturing. Labor force participation stood at around 57% in 2016 and early 2017, the lowest rate since 2012. In 2019, the unemployment rate was 17,76%.

Macedonia’s economy is closely linked to Europe as a customer for exports and source of investment, and has suffered as a result of prolonged weakness in the eurozone.

The reform agenda, outlined in the Government Program 2017–20, focuses on economic growth, job creation, fair taxation, support to small and medium enterprises, and reform of social protections for the most vulnerable.  

BANKING SYSTEM

The financial system in Macedonia consists of the National Bank of the Republic of North Macedonia (NBRNM), commercial banks, financial companies, savings houses, exchange offices, the Deposit Insurance Fund, insurance companies, pension funds, investment funds, brokerage firms, and a stock exchange.  The banking system itself is two-tiered, based on the Banking Law and the National Bank Law. NBRNM is the independent money-issuing institution responsible for price stability, stability of the national currency (denar), stability of the financial system, liquidity of payments within the country and abroad, and the conduct of monetary policy and foreign exchange policy.  The Supervision Department at NBRNM serves as the main regulatory body responsible for the supervision of all banking institutions and savings houses.

The banking system in North Macedonia consists of 13 private banks, one state-owned bank (Macedonian Bank for Development Promotion), and two savings houses. According to the Banking Law, banks observe the principles of profit maximization, liquidity, safety, and profitability.  A foreign bank can have a presence either as a legal entity or by opening a branch or a representative office.  In 2018, foreign capital was present in 13 and was dominant in 11 banks, controlling 71.6 percent of total banking sector assets, 80 percent of total loans, and 71.8 percent of total deposits. The operations of non-bank financial institutions are regulated by the provisions of the previous Banking Law and appropriate sub-laws. North Macedonia’s Total Deposits was reported at 7.787 USD bn in July 2020.

In 2018 NBRNM conducted regular stress-tests on banking sector sensitivity to different risks.  All tests showed that the banking sector is healthy and resilient to such shocks, with its capital adequacy ratio remaining well above the legally required minimum of eight percent in all scenarios.  Banking supervision is in full compliance with BASEL 2 recommendations, and it is currently implementing provisions of BASEL 3 standards.

Although considerably improved over the past several years, North Macedonia’s financial system is still relatively underdeveloped compared to Western standards. Banking is very conservative, offering traditional banking services only. Credit is available to private companies, but is still subject to significant collateral in the form of real estate, which often is appraised by the banks at lower than market value. Overall customer service does not meet Western standards. However, the use of credit cards is widespread and most companies and shops accept credit cards as a payment instrument.

HEALTHCARE

Once a healthcare leader in the region, the Republic of Macedonia is now struggling to maintain its healthcare system at an average level and its once good reputation. A lot of changes have been introduced in order to reverse the effects of the loss of high quality staff and the decay of medical facilities, but such improvements are currently not or little visible.

Almost all citizens (about 95% of the total population) of North Macedonia are insured by the obligatory HIS, in various modalities, on the basis of their employment, on the basis of their retirement rights and on other grounds, unemployed persons registered by the Employment Office, beneficiaries of basic social care, war-disabled persons (soldiers and civilians), family members of the insured who serves in the Army, persons who are in prison or sentenced to other punitive measures, as well as persons in religious communities. 

There have been some remedies proposed in the governmental draft programme for the period between 2017-2020. In order to keep the quality staff in the country, higher salaries (doubled by the end of the mandate) and better specialisation conditions are planned. Certain fees that are currently covered by the patients themselves, according to the programme, will be eliminated, and there will also be a reduction in administrative staff to ensure better quality and efficiency. The Government also plans to introduce changes that will decrease check-up and appointment waiting time, as well as increase quality in that respect. The introduction of certain medical facilities like a diabetes centre, and children’s hospital has also been planned for, as well as construction of a new and well-equipped university clinical centre to pave the path to quality medical research and healthcare.

SOCIAL WELFARE

The main institutions where citizens of Macedonia (F YROM) can initiate the procedure to protect and/or exercise their social rights are the Centers for Social Work, which can be found in most major municipalities. They decide on the rights related to social security, detects and determines social issues and problems, provides social assistance for vulnerable cases (including VOTs), etc.

The main structure of the national pension system in North Macedonia consists of: a statutory pension scheme (first pillar); a statutory funded pension scheme (second pillar); and a supplementary pension scheme (third pillar). The statutory pension scheme is mandatory for all economically active people. The statutory funded pension scheme is mandatory for those who started to work from 1 January 2013 onwards.

The assistance to vulnerable persons and groups falls within the scope of the Ministry of Labor and Social Policy. Together with the Centers for Social Work and other public institutions, they implement numerous programs dedicated to the especially vulnerable groups.

SOURCES
https://www.export.gov/apex/article2?id=North-Macedonia-Banking-Systems
https://www.fomoso.org/en/mosopedia/background-knowledge/challenges-in-the-healthcare-system-of-the-republic-of-macedonia/
http://www.worldbank.org/en/country/northmacedonia/overview
https://www.cia.gov/LIBRARY/publications/the-world-factbook/geos/mk.html
https://files.returningfromgermany.de/files/CFS%202018%20North%20Macedonia%20ENG.pd
http://country.eiu.com/macedonia
https://www.nordeatrade.com/en/explore-new-market/north-macedonia/trade-profile