Archive:Enlargement countries - finance statistics

Data from February 2020.

Planned article update: June 2021.

Highlights

Three of the EU candidate countries and potential candidates — Albania, Montenegro and North Macedonia — recorded government budget deficits every year between 2008 and 2018.

During recent years, the highest annual consumer price increases among the EU candidate countries and potential candidates were recorded in Turkey.

EU enlargement countries - harmonised indices of consumer prices, 2009-2019

This article is part of an online publication and provides information on a range of financial statistics for the European Union (EU) enlargement countries, in other words the candidate countries and potential candidates. Montenegro, North Macedonia, Albania, Serbia and Turkey currently have candidate status, while Bosnia and Herzegovina and Kosovo* are potential candidates.

The article provides finance statistics in relation to a range of topics, including government finance (such as the general government deficit/surplus and government debt relative to gross domestic product (GDP)), foreign direct investment (FDI), the money supply, consumer price indices, interest and exchange rates.

Full article

Government deficit and debt

The general government deficit of the EU-27 narrowed from 6.0 % of GDP in 2009 and 2010 — during the global financial and economic crisis and its immediate aftermath — to 0.4 % of GDP in 2018

The global financial and economic crisis triggered a sharp downturn in public finances across the EU and some countries continue to struggle to eliminate their public deficits. The general government deficit across the EU-27 increased to 6.0 % of GDP at the height of the crisis in 2009 and remained at this level in 2010. Thereafter it contracted during eight consecutive years to reach 0.4 % of GDP by 2018. Between 2015 and 2018 the deficit was below the level recorded in 2008 (2.0 % of GDP) when the crisis had already been starting to unfold. 2018 was the sixth consecutive year that the deficit was smaller than 3.0 % of GDP (see Table 1).

Table 1: General government deficit/surplus relative to GDP, 2008-2018
(% of GDP)
Source: Eurostat (gov_10dd_edpt1)

Three of the candidate countries and potential candidates recorded government deficits every year during the period 2008-2018

At the beginning of the crisis, in 2008, all of the candidate countries and potential candidates for which data are available (not relevant for Kosovo, not available for Turkey) had a government deficit. These ranged from 0.5 % of GDP in Montenegro to 5.6 % of GDP in Albania. This situation continued with the deficit (relative to GDP) of each candidate country or potential candidate widening in 2009, while Turkey also recorded a deficit in 2009 (beginning of the time series). Between 2009 and 2012, the candidate countries and potential candidates continued to record government deficits. In 2013 and 2014, the situation changed slightly as Turkey reported surpluses (0.2 % relative to GDP) in both years. In 2015, Turkey again reported a surplus, as did Bosnia and Herzegovina. In 2016, Bosnia and Herzegovina maintained its surplus while Turkey returned to a deficit (1.1 % relative to GDP) and the other four candidate countries and potential candidates for which data are available continued to report deficits, ranging from 1.2 % in Serbia to 2.8 % in Montenegro. In 2017 and 2018, a similar pattern was observed, with Bosnia and Herzegovina maintaining its surplus and most of the other economies maintaining their deficits, although Serbia also recorded a surplus. As such, Montenegro, North Macedonia and Albania reported deficits every year between 2008 and 2018.

Government debt relative to GDP in 2018 was lower among the candidate countries and potential candidates than in the EU-27

General government debt across the EU-27 stood at 64.9 % in 2008 and rose each year to a peak of 86.5 % in 2014, before falling to 79.7 % in 2018 (see Table 2).

Table 2: General government consolidated gross debt relative to GDP, 2008-2018
(% of GDP)
Source: Eurostat (gov_10dd_edpt1)

In 2008, at the onset of the financial and economic crisis, the ratio of general government debt-to-GDP in the candidate countries and potential candidates ranged from 18.7 % in Bosnia and Herzegovina to 51.8 % in Albania; note that Kosovo reported no debt prior to 2009 and that the time series available for Turkey starts in 2012. Following the onset of the crisis, government debt (relative to GDP) increased in 2009 in all of the candidate countries and potential candidates. Developments thereafter were more mixed. The latest data available show that government debt-to-GDP ratios in 2018 were lower — sometimes considerably so — across the candidate countries and potential candidates than in the EU-27: Kosovo had the lowest ratio (17.1 %); Turkey had a ratio around three tenths (30.4 %); North Macedonia as well as Bosnia and Herzegovina had ratios just over two fifths (40.6 % and 40.8 % respectively); Serbia had a ratio above a half (54.4 %); Albania and Montenegro had ratios either side of two thirds (65.1 % and 70.9 % respectively).

Foreign direct investment

Flows of foreign direct investment (FDI) result from investors building up or reducing their assets abroad by investing in or disinvesting from foreign companies. Flows of FDI are notoriously erratic (with big changes from one year to the next as investment decisions are often lumpy).

Some of the candidate countries and potential candidates recorded negative flows of outward FDI, in other words, disinvestment, which occurs when previous investments are withdrawn from foreign enterprises (perhaps to consolidate operations in domestic markets). For example, this occurred in Montenegro in 2016 and in Bosnia and Herzegovina in 2018 (see Table 3).

Table 3: Foreign direct investment
(FDI) flows, 2008-2018
(million EUR)
Source: Eurostat (bop_fdi6_flow)

Inward foreign direct investment played a considerable role in some of the candidate countries and potential candidates

Each of the candidate countries and potential candidates (for which data are available) had a higher level of FDI inflows than outflows; in other words, each of these economies was a net recipient of FDI. This was the case not just in 2018, but in all years shown in Table 3. Together the candidate countries and potential candidates had a combined level of inward FDI valued at EUR 14.5 billion in 2017, down from EUR 15.9 billion in 2016 and EUR 20.4 billion in 2015. Turkey was the largest beneficiary of inward FDI among the candidate countries and potential candidates in absolute terms, accounting for two thirds of the total in 2017.

Growth of 64 % was observed in the value of inward FDI in Albania between 2008 and 2018; North Macedonia (up 54 %) and Serbia (up 29 %) also recorded higher inward FDI in 2018 than in 2008. The four other candidate countries and potential candidates recorded lower inward FDI in 2018 (2017 for Turkey and Kosovo) than in 2008, down overall by 29 % in Turkey, 31 % in Kosovo, 37 % in Montenegro and 41 % in Bosnia and Herzegovina.

Money supply

The money supply may be simply described as the circulation of money within an economy. There are various measures of money supply and these are differentiated by the liquidity of the assets under consideration. The narrowest common definition is M1, which measures the cash and coins in circulation, plus the value of current accounts. M2 is a somewhat broader concept, including M1, plus savings deposits, money market mutual funds and other time deposits — which are less liquid — but may nevertheless be converted relatively quickly into cash or sight deposits.

As may be expected, the amount of money in circulation varies according to the size of each economy, with the money supply in Turkey considerably larger than in any of the other candidate countries and potential candidates (see Table 4). North Macedonia recorded the fastest expansion in its money supply (as measured by M1 in euro terms) between 2013 and 2018, increasing overall by 108 %. Turkey recorded the slowest rate of expansion, as the money supply increased by 27 % between 2013 and 2017, less than the increase recorded in the euro area (53 %). Note that there are no data for the money supply in Montenegro or Kosovo as both use the euro as their de facto domestic currency.

Table 4: Money supply, 2013-2018
(million EUR)
Source: Eurostat and the European Central Bank

Generally, if the money supply rises faster than economic growth, then inflationary pressures will be added to the economy. However, in the aftermath of the global financial and economic crisis, the process of quantitative easing was used by several central banks in order to inject additional quantities of money into their banking systems with the goal of encouraging growth; evidence suggests that this process did not result in inflationary pressures (see Table 5 for more information on price developments).

Consumer prices

Consumer price growth within the EU-27 was at most 0.4 % between 2014 and 2016 and between 1.4 % and 1.8 % from 2017 to 2019

The all-items harmonised index of consumer prices remained at relatively low levels across the EU during the period 2009-2019. The effects of the global financial and economic crisis caused a rapid slowdown in price increases in the EU-27 in 2009 when a relative low of 0.8 % was recorded. Thereafter, prices in the EU-27 rose by 1.8 % in 2010 and by 2.9 % in 2011, before the pace of price increases slowed in 2012, 2013 and 2014 and more or less came to a halt in 2015 and 2016 as increases of 0.1 % and 0.2 % were recorded (see Table 5). Consumer prices in the EU-27 rose by between 1.4 % and 1.8 % per year in 2017, 2018 and 2019.

Table 5: Harmonised indices of consumer prices, 2009-2019
(% change relative to the previous year)
Source: Eurostat (prc_hicp_aind)

The highest price increases among the candidate countries and potential candidates were recorded in Turkey

Consumer price increases in Serbia and Turkey over the period 2009-2019 were systematically higher than those recorded across the EU, while they were also normally higher in Albania — only in 2012 and 2018 did Albania have inflation as low as or lower than the EU-27. By contrast, price increases in Bosnia and Herzegovina were generally lower than in the EU-27 (2010 and 2011 were the only exceptions). For the other candidate countries and potential candidates there was no clear pattern. As in the EU-27, prices rose more strongly in 2017, 2018 and 2019 than in 2014, 2015 and 2016 in most of the candidate countries and potential candidates. Turkey was generally an exception to the pattern of relatively low rates between 2014 and 2016 and slightly higher rates in the most recent years: it recorded relatively high inflation rates throughout the period under consideration, with annual price increases ranging between 6.3 % and 16.3 %. Between 2009 and 2013 Serbia also recorded relatively high inflation rates, but since 2014 these have been more in line with the rates observed in the majority of the candidate countries and potential candidates. Several candidate countries and potential candidates experienced deflation in recent years, namely Montenegro in 2014, Bosnia and Herzegovina between 2013 and 2016, and Kosovo in 2015.

Aside from Turkey’s increase of 15.2 %, the latest information available for each of the candidate countries and potential candidates shows that consumer price increases in 2019 remained relatively low. Kosovo’s increase of 2.7 % was the next highest, while inflation rates were below 1.0 % in North Macedonia, Bosnia and Herzegovina, and Montenegro.

Interest rates

Interest rates equate to the cost charged/paid for the use of money; they are generally expressed as an annual percentage rate (APR). The lending rate is the rate charged by banks on loans to their prime customers: if the borrower is a low-risk party, they will usually be charged a lower interest rate. The deposit rate is the rate paid by commercial or similar banks for demand, time, or savings deposits: larger deposits or deposits for lengthier periods of time will generally attract higher interest payments.

Table 6 shows the variation in lending rates between the candidate countries and potential candidates; it is important to note that different definitions apply to some of the economies. The latest information available shows that lending rates ranged from 2.75 % in North Macedonia in 2019 to 6.65 % in Kosovo in 2018, with the 18.12 % rate in Turkey in 2017 far above this range. During the period 2009-2019 there was generally a pattern of falling lending rates. Indeed, most of the candidate countries and potential candidates recorded their lowest lending rate for the most recent period for which data are available, the exceptions being Turkey and Albania.

Table 6: Interest rates, annual averages, 2009-2019
(%)
Source: Eurostat

A similar pattern was observed when analysing the development of deposit rates, as these rates also fell during the period studied in most of the candidate countries and potential candidates. The main exception to this development was again Turkey, where the deposit rate alternated between increases and decreases in most of the recent years and where the latest rate (2017 data) was higher than in earlier years. The most recent deposit rates ranged from 0.05 % in Bosnia and Herzegovina in 2018 to 1.31 % in Kosovo in 2018, with the latest rate for Turkey well above this range, at 13.53 % in 2017. The spread in the most recent rates (the difference between lending rates and deposit rates) ranged between 2.50 percentage points in Serbia and 5.76 points in Albania.

Exchange rates

Market-based exchange rates reflect the rate at which one currency is exchanged for another. Table 7 presents exchange rates for the candidate countries and potential candidates in relation to the euro; note that while Montenegro and Kosovo are neither EU Member States, nor members of the euro area, they do use the euro as their de facto domestic currency (and as such their exchange rates are set in the table at parity). Note also that Bosnia and Herzegovina maintains a unilaterally fixed exchange rate against the euro and that North Macedonia has pegged its domestic currency to the euro (explaining the low or lack of fluctuation in their exchange rates).

Table 7: Euro exchange rates, annual averages, 2009-2019
(1 euro = … national currency)
Source: Eurostat (ert_bil_eur_a)

As such, there were only three candidate countries and potential candidates which had floating exchange rates against the euro during the period 2009-2019. Two of these saw the value of their currency depreciate: the Serbian dinar depreciated by 20.3 % and the Turkish lira by 66.0 %. By contrast, the Albanian lek appreciated by 6.9 %.

Source data for tables and graphs

Enlargement countries — finance: tables and figures

Data sources

Data for the enlargement countries are collected for a wide range of indicators each year through a questionnaire that is sent by Eurostat to candidate countries or potential candidates. A network of contacts has been established for updating these questionnaires, generally within the national statistical offices, but potentially including representatives of other data-producing organisations (for example, central banks or government ministries). The statistics shown in this article are made available free-of-charge on Eurostat’s website, together with a wide range of other socio-economic indicators collected as part of this initiative.

The European system of national and regional accounts (ESA) provides the methodology for national accounts and government statistics in the EU. Under the terms of the excessive deficit procedure (EDP), EU Member States are required to provide the European Commission with their government deficit and debt statistics before 1 April and 1 October of each year. From October 2014 onwards, candidate countries were asked to report EDP-related data to Eurostat with the same frequency as EU Member States. This reporting was extended to potential candidates as from October 2018.

The general government sector includes all institutional units whose output is intended for individual and collective consumption and mainly financed by compulsory payments made by units belonging to other sectors, and/or all institutional units principally engaged in the redistribution of national income and wealth. The public balance is defined as general government net borrowing/net lending reported for the excessive deficit procedure and is expressed in relation to GDP. Government debt is the gross debt outstanding at the end of the year of the general government sector measured at nominal (face) value and consolidated.

Tables in this article use the following notation:

Value in italics	data value is forecasted, provisional or estimated and is therefore likely to change;
:	not available.

Context

The global financial and economic crisis resulted in serious challenges being posed to many European governments. The main concerns were linked to the ability of national administrations to be able to service their debt repayments, take the necessary action to ensure that their public spending was brought under control, while at the same time trying to promote economic growth.

Within the EU, multilateral economic surveillance was introduced through the stability and growth pact (SGP) which provides for the coordination of fiscal policies. Under the terms of the SGP, Member States pledged that their government deficit would not exceed 3 % of gross domestic product (GDP), while their debt would not exceed 60 % of GDP. Indeed, the disciplines of the SGP are intended to keep economic developments in the EU, and the euro area countries in particular, broadly synchronised. Furthermore, the SGP is designed to prevent EU Member States from taking policy measures which would unduly benefit their own economies at the expense of others.

Economic and financial statistics have become one of the cornerstones of governance at a global and European level, for example, to analyse national economies during the financial and economic crisis or to put in place EU initiatives such as the European semester or macroeconomic imbalance procedures (MIP).

While basic principles and institutional frameworks for producing statistics are already in place, the enlargement countries are expected to increase progressively the volume and quality of their data and to transmit these data to Eurostat in the context of the EU enlargement process. EU standards in the field of statistics require the existence of a statistical infrastructure based on principles such as professional independence, impartiality, relevance, confidentiality of individual data and easy access to official statistics; they cover methodology, classifications and standards for production.

Eurostat has the responsibility to ensure that statistical production of the enlargement countries complies with the EU acquis in the field of statistics. To do so, Eurostat supports the national statistical offices and other producers of official statistics through a range of initiatives, such as pilot surveys, training courses, traineeships, study visits, workshops and seminars, and participation in meetings within the European Statistical System (ESS). The ultimate goal is the provision of harmonised, high-quality data that conforms to European and international standards.

Additional information on statistical cooperation with the enlargement countries is provided here.

Notes

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.