The World Bank said in its latest report that the Western Balkans will see an economic decline this year because of the war in Ukraine. report said.

“In the Western Balkans, growth is forecast to decline to 3.2 percent in 2022, as spillovers from the war impact the sub-region primarily through commodity channels,” the World Bank said in its Europe and Central Asia Economic Update from the office of the Chief Economist.

It warned that several countries remain vulnerable to the fallout of the Russian invasion of Ukraine even though the share of economic output directly tied to Russia and Ukraine is relatively small for the Western Balkans as a whole. The update specified that Montenegro depends on Russia for 11 percent of its Foreign Direct Investments (FDI), Serbia for 5 percent of its exports and 5.4 percent of its imports in 2021.

“The more acute risks for the Western Balkans stem from possible disruptions in the supply of natural gas and oil. The sub-region receives 67 percent of its natural gas imports from Russia, with Bosnia and Herzegovina, North Macedonia (via Bulgarian pipeline), and Serbia completely reliant on Russia for their natural gas supply,” the update said and added that Bosnia-Herzegovina has limited storage capacities while Serbia’s storage capacities “helps mitigate the supply shock in the near term”. It warned of possible sudden price rises if the supply of gas from Russia declines. “Concerns about natural gas disruptions have already spurred increases in wholesale electricity prices”, it added.

“Much like in Central Europe, indirect spillovers from the Russia-Ukraine conflict pose substantial risk for the Western Balkans, particularly if the conflict triggers a slowdown in the euro area. The Western Balkans is heavily reliant on the Euro area as a destination for 63 percent of its exports, while more than half of the sub-region’s FDI and nearly two-thirds of its remittances are sourced from the Euro area,” the update said.