Financial Systems in Western Balkans : Present and Future

Following a decade of conflicts, Western Balkan countries accomplished robust economic growth in the 2000s. This growth pattern was domestic demand driven and externally financed, hence was hampered significantly by the global financial crisis and subsequent euro area debt crisis. Despite modest post-crisis recovery, the region continues to struggle with structural problems that undermine economic growth. Prospects for the region remain significantly dependent on external developments-but also progress on structural reform agendas. Against this backdrop, further financial deepening and improved financial stability are essential to boosting sustainable growth. The size and structure of the financial sector varies considerably across the Western Balkan countries and is primarily bank-based. In the near term, policymakers and regulators in the region face a number of challenges with regard to supporting economic growth, expanding financial inclusion, and maintaining financial stability. Banking regulation and oversight have improved over the last decade, but a number of important shortcomings in some segments remain. The book is arranged as follows: While the snapshot in Chapter one focuses on near term challenges and policy responses with regard to financial sector development and stability, the following chapters look more broadly at the external context and take a longer term view on challenges and opportunities that could present themselves over the next decade. It does so not by proposing a single forecast, or view of the future, but by exploring key uncertainties and applying the tool of scenario thinking to create three different visions for the world around the Western Balkans financial systems in 2025 aimed at informing the development of financial sector strategies that contribute to the country's overall success in sustainable and inclusive growth