A recent study conducted by the International Monetary Fund (IMF) 'Public Infrastructure in the Western Balkans: A Highway to Higher Income' has identified the region's missing core public infrastructure as a significant obstacle for higher economic growth. The analysis shows that a regionally coordinated public infrastructure push, coupled with better management of actual projects, could significantly increase per capita income.
Catching up with the EU in infrastructure levels is hard: public investments require ample budget resources and strong institutional frameworks governing the selection, execution, and monitoring of projects. These two conditions are largely missing in the Western Balkans.
Despite the obstacles, the potential gains of improving infrastructure clearly point to the need for Western Balkan countries to invest in modernizing their transport arteries and energy and telecom infrastructure. In order to achieve that, the IMF recommends the following actions: Investing in investing - Bolstering the capacity to plan, select, and carry out infrastructure projects would ensure that available resources are put to better use and would improve the region’s ability to absorb available donor financing; Better regional coordination of investment projects, since many infrastructure networks stretch over borders; Saving on recurring expenses to find resources for costly projects - Governments could create further room for maneuver by broadening their tax base (by eliminating exemptions and tax incentives) and strengthening tax compliance, both of which result in more revenues collected; External financing - This sort of funding should play a larger role in public infrastructure development in the Western Balkans, leaving domestic financial resources to serve the needs of the private sector; Not endangering overall macroeconomic stability by overambitious or poorly executed public infrastructure projects - Trade-offs between economic growth, inflation, and external current account deficits should be a key element of any policy discussion on scaling up public infrastructure in the region.