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BALKANS: SOS Shops Tell the Economic Story

Vesna Peric Zimonjic

BELGRADE, Apr 15 2009 (IPS) - The new century brought new growth across the Balkans after the turbulent 1990s. But the advance is proving short-lived as the global recession hits the region hard.

Serbia has introduced what are called ‘SOS’ shops in major cities to provide basic food to the jobless and to people on minimum wages. The Serbian Statistical Office (RZS) estimates that 10,000 jobs are being lost a month since the beginning of this year. Unemployment stands at 14 percent.

In a joint move by the Association of Free and Independent Trade Unions and one of the major retail chains, Jabuka, everyone with a monthly income of less than 20,000 dinars (280 dollars) can get special cards for shopping at some 10 SOS outlets.

“The prices there are 30 to 50 percent lower than in major supermarkets,” Jabuka manager Milorad Miskovic told IPS. “It’s a hard time for many people, so we decided to lower our margin of profit to only five percent at the SOS shops.”

Serbia has given up hope of a continuing 6.7 percent growth annually that it has seen on average since 2000. “We see flat or negative 0.5 percent growth in 2009,” deputy finance minister Slobodan Ilic told reporters in Belgrade.

Serbia has negotiated 4 billion dollars credit from the International Monetary Fund (IMF) to bridge the budgetary gap due to a large drop in taxes and revenues. Under conditions for the credit, it must introduce drastic belt- tightening measures that include an 18-month public sector wage freeze and tax hikes to boost fiscal revenues, together with price caps to keep inflation under control.

In the face of an unprecedented public outcry, the finance ministry refrained from introducing additional tax on all income over 12,000 dinars (170 dollars) a month.

Neighbouring Croatia too has announced that its economy is in recession, but the government is making additional efforts to keep tourism alive. Tourism, mostly to the Adriatic Coast, provides 20 percent of Croatia’s gross domestic product (GDP).

Croatia is even inviting Serbs to return to its coast, for the first time since the war of independence in 1991. The war between Croatia and Serbia left at least 10,000 Croats dead.

“Millions of Serbs were visiting Croatia prior to the war,” Tomislav Popovic from the Istrian tourist organisation in the north Adriatic told IPS. “It’s high time they did again. We are neighbours, nothing can change that, we have to have good relations.” Popovic was member of a Croatian delegation that visited the Belgrade Tourism Fair earlier this month.

Tiny Montenegro also hopes that tourism on its part of the Adriatic coast will help the economy survive. Foreign investments, particularly from Russia, have dried up.

Montenegrin tourism minister Predrag Nenezic has announced that prices on the Adriatic coast will be dropped 35 percent “in order to attract more tourists.”

But economist Vladimir Gligorov said at a recent round table on the economy of the Balkans that “hopes for tourism saving local economies can easily remain just hopes.”

Gligorov warned that “all indicators say that due to overall decline in spending in Europe, tourism cannot be propulsive. There can only be a decline in tourist visits and spending.”

In Albania the IMF has revised its prediction for growth to between zero and one percent for 2009, after years of five percent annual growth. Much of the earlier growth cme from tourism and the construction industry. The latter is now almost at a standstill due to lack of investment.

Bosnia-Herzegovina is worst hit. The economy here has been in ruins ever since the war ended in 1995. According to the local statistics office, unemployment is 43 percent.

“We have lived in crisis and devastation since wars in former Yugoslavia began almost 20 years ago,” Mirsad Selic (44) from Sarajevo told IPS on the phone. “We lost almost everything. The worst loss is the human capital of more than 100,000 dead, and nothing can replace that.”