How well the welfare of individuals has increased in Albania and the Balkans and how it has been distributed?

net wealth

How well the welfare of individuals has increased in Albania and the Balkans and how it has been distributed?

A reading of the latest edition of Credit Suisse Global Welfare Report for 2019, which is being published annually and with a history of over 20 years, shows that the Western Balkan countries, except Serbia, have a slight increase in the number of adults.

Montenegro has seen a significant increase of 17.9% for the period 2014 to 2019. While Albania marks an increase of 3.7% in the same period. Northern Macedonia, Bosnia and Kosovo have minimal growth, indicating a slight change in the adult group.

Looking at the same line with the total population change over the same period, the report shows that Albania is with the most significant increase in population by 0.4% although a slight increase if we look at the numbers of population. Kosovo, Northern Macedonia and Montenegro have a slight population growth of 0.2%. Serbia and Bosnia, meanwhile, have a declining population. This decline is due to low fertility rate (Bosnia has a fertility rate of 1.26 and Serbia 1.48 per thousand) and a lack of inflow of migrants from other countries in the region and beyond.

As long as Serbia, Bosnia and other closest countries are not attractive places for potential immigrants, their population will continue to age and decline, a prospect that also means it will make catching even harder in terms of wealth and living standards with western countries. Meanwhile, recent movements of population from Western Balkan countries to Western European countries, although growing, are not considered an influential factor in these statistics, as long as they are not permanent residents in these countries.

000 persons
Indicators* Year Albania Serbia North Macedonia Montenegro Bosnia-Herzegovina Kosovo**
Adults 2015 2,146 6,837 1,598 9,647 2,791 1,381
2019 2,225 6,798 1,617 11,371 2,815 1,384
Difference (in %) 3.7% -0.6% 1.2% 17.9% 0.9% 0.2%
Population 2015 2,923 8,851 2,079 628 3,536 1,800
2019 2,936 8,748 2,084 629 3,505 1,804
Difference (in %) 0.4% -1.2% 0.2% 0.2% -0.9% 0.2%
* data from Reports of year 2014 and 2019, Credit Suisse Global Wealth Databook

The Western Balkan countries are on a steady course of increasing their well-being and this is evident from the level of net national wealth growth [1]. As these countries increase in net wealth value, they appear not to offset the decline in natural resources with the risk that in the long run, growth will decline as the wealth on which this growth is based is eroding year after year.

But, seeing as the pace of population growth and adulthood in the Western Balkans has increased, GDP growth and welfare levels have a marked increase in incomes for adults (adult) in the last 5 years.

Albania with 20%, Montenegro with 18% and Bosnia with 18% have an increase in income per adult, followed by Northern Macedonia with 14%. All this comparative overview between 2014 and 2019 is an indication of how production capacities and resources have been utilized in each Western Balkan country. Starting from the comparative base year 2014, it appears that in Kosovo, Albania and Serbia there has been a marked increase in well-being greater than the regional average, which refers to the overall value of net wealth owned by the country’s citizens, including capital of natural and human resources.

Indicators* Year Albania Serbia North Macedonia Montenegro Bosnia-Herzegovina Kosovo
GDP/ Adult 2014 5,827 8,304 6,902 9,647 6,009 n/a
2019 7,001 7,580 7,900 11,371 7,110 5,817
Difference (in %) 20% -9% 14% 18% 18%
Wealth / Adult 2014** 10,309 7,784 11,871 21,567 12,336 1,921
2019 31,366 25,046 25,723 53,484 27,873 25,723
Difference (in %) 3.0 3.2 2.2 2.5 2.3 13.4
* data from Reports of year 2014 and 2019, Credit Suisse Global Wealth Databook
** data for Kosovo belong to Report 2016, Credit Suisse Global Wealth Databook

Most of the change in wealth value year after year in the period 2014 to 2019 is due to the change in asset prices and exchange rates. Foreign exchange market volatility in the Western Balkan countries, or the foreign exchange market in countries that do not have capital stock exchange, are usually the largest source of profit and loss. But in these years the 5-year balance sheet seems to have been positive thanks to the stability of the national currencies of the Western Balkan countries.

In an in-depth reading of the indicators that represent the wealth value of different countries of the world, what is noteworthy for the countries of the Western Balkans region is the increase in the wealth value of each of the countries.

Thus, according to two reports obtained for comparative analysis, it is apparent that in 2019, the total value of the national net wealth

  • in Albania was US $ 70 billion, while in 2014 it was US $ 23 billion. The increase is 3 times.
  • in North Macedonia US $ 42 billion, while in 2014 it was US $ 19 billion. The increase is 2.2 times.
  • in Serbia was US $ 170 billion, while in 2014 it was US $ 59 billion. The increase is 2.9 times.
  • in Bosnia and Herzegovina was US $ 78 billion, while in 2014 it was US $ 37 billion. The increase is 2.1 times.
  • in Montenegro was US $ 26 billion, while in 2014 it was US $ 10 billion. The increase is by 2.6 times.

Serbia has the highest national net wealth, due to its inheritance, with US $ 170 billion net and the second highest growth of net wealth after Albania, which for 5 years has increased net wealth 3 times based on the values which have created mostly its citizens. But Bosnia holds the second most valuable national net wealth position in the Western Balkans at US $ 78 billion.

Based on the map of the distribution of national net wealth, it is seen that the Slavic countries still maintain high rates of increase in their property value, which is augmented not only by the contributions of the citizens themselves, but also by the investments that have increased in the two countries mentioned above.

Indicators* Year Albania Serbia Montenegro Bosnia-Herzegovina
Financial wealth/ Adult 2014 3,244 5,008 18,442 3,413
2019 4,612 6,281 24,397 3,961
Difference (in %) 42.2% 25.4% 32.3% 16.1%
Non financial wealth / Adult 2014 21,088 16,686 27,006 23,038
2019 28,396 20,541 33,306 25,830
Difference (in %) 34.7% 23.1% 23.3% 12.1%
Debts / Adult 2014 1,322 1,459 3,665 1,813
2019 1,642 1,777 4,219 1,918
Difference (in %) 24.2% 21.8% 15.1% 5.8%
Median wealth / Adult 2014 10,678 9,113 19,216 11,398
2019 14,731 10,737 24,242 13,037
Difference (in %) 38.0% 17.8% 26.2% 14.4%
* data from Reports of year 2014 and 2019, Credit Suisse Global Wealth Databook
Note: For Kosovo and North Macedonia there’s no data

The table above shows the absolute value and the percentage change for the comparative period 2014 to 2019 of financial wealth, non-financial wealth and adult debt value.

A more detailed breakdown of the structure of the wealth of adults by looking at the change that has occurred for (a) financial wealth, (b) non-financial wealth, as well as deducting the average debt due to each adult is seen that in Albania there is an increase e.g. financial wealth per adult significantly higher than in other Western Balkan countries with a difference of 66% higher than adult persons in Serbia and 2.7 times higher than adult in Bosnia

Likewise, non-financial wealth per adult in Albania increased at a rate 1.5 times higher than non-financial wealth per adult in Montenegro and Serbia, and a 2.7-fold higher increase that nonfinancial wealth increased in Bosnia.

But as there is a higher growth rate of financial and non-financial wealth per adult in Albania, there is also an increase in the value of debt per adult relative to these countries. Thus, the debt per adult in Albania for last five years has increased by 11% more than this indicator in Serbia, and up to 4.5 times higher than in Bosnia.

Today, equity in wealth is closely linked to income equity. But in the past 5 years it has been shown that everything has to do with the shock of property value by groups of adults, a concentration and saving of wealth in fewer people.

Part of this wealth inequality is in fact dictated by age, not just population groups. Thus, e.g. young people tend to have a lot of debt and no more savings, which means they have a negative balance of their net wealth.

But the table below shows the landscape and the volatility of wealth by value categorization, highlighting the reality of rising inequality on average in the Western Balkans in just a few years, i.e. 2014 to 2019.

The index above shows the distribution of net welfare of domestic value to individuals and in some Western Balkan countries, defined as marketable value for financial wealth as well as non-financial wealth (mainly buildings and land) after deducting the debt, which result to be as an average net wealth for each adult.

Distribution of wealth through adults,and the difference between 2014 vs. 2019 në %
Adult wealth:
Country Year < 10,000 US.D 10,000 – 100,000 US.D 100,000 – 1 million US.D > 1 million US.D GINI
Albania 2014 69.1 30.1 0.9 0.01 66.8
2019 38.0 57.9 3.9 0.1 63.7
Difference (in %) -31.1 27.8 3.0 0.1 -3.1
Bosnia-Herzegovina 2014 61.8 37.1 1.1 0.01 66.3
2019 42.0 54.5 3.4 0.1 64.2
Difference (in %) -19.8 17.4 2.3 0.1 -2.1
Montenegro 2014 48.7 48.4 2.8 0.01 65.7
2019 25.0 65.0 9.7 0.3 64.8
Difference (in %) -23.7 16.6 6.9 0.3 -0.9
North Macedonia 2014 65 33.9 1.1 0.01 69
2018** 68 30.8 1.2 0.02 65.5
Difference (in %) 3.0 -3.1 0.1 0.0 -3.5
Serbia 2014 77.8 21.7 0.5 0.01 65.4
2019 47.9 48.7 3.3 0.1 67.6
Difference (in %) -29.9 27.0 2.8 0.1 2.2
* data from Reports of year 2014 and 2019, Credit Suisse Global Wealth Databook
* data for North Macedonia belong to the Reports 2014 and 2018, Credit Suisse Global Wealth Databook

In clarification of the table data above, from the comparison between 2019 and 2014:

– In Albania there is a decrease by 31% of the group of adults with a wealth below 10.000 USD, while there is an increase by 27.8% of the group of adults with wealth value from 10 thousand to 100 thousand US.D, and an increase with 3% of the number of adults with a wealth value over 1 million US.D. This change in the percentages of groups by wealth value is also seen in the GINI Index, which shows a decrease of 3.1 points, indicating that wealth is oriented towards the group that can be considered as the middle class of the population, but with an increase in the wealth in high value to fewer adults.

– In Serbia, Bosnia and Montenegro the same way of transferring wealth values ​​has happened as in the case of Albania, but with some levels of shifting more towards adults with wealth values ​​from US $ 100,000 to $ 1 million and those adults with wealth over $ 1 million U.S. But what is striking is that in Serbia inequality has increased more in 2019 than in 2014.

– In Northern Macedonia there is an increase of 3% of the group of adults with a wealth value below 10.000 USD, while there is a decrease with 3.1% of the group of adults with a wealth value from 10.000 to 100.000 USD, as well as a slight increase of 0.1% in the number of adults with a wealth value ​​from 100 thousand to 1 million US.D. This Western Balkan country is in a trend in opposite to other countries in terms of a better distribution than other countries in terms of wealth values, reflecting this tendency also when we see the sharp decline of the GINI Index by -3.5 points.

When most of the wealth value is more capital-based, there is naturally less room for other human and movable capital, including financial assets. The strongest negative impact is between equity and other financial assets, as other financial assets are larger in Western Balkan countries where social expenditure distribution systems, mainly from the state budget, but also from private funds.

Meanwhile, what is characteristic of wealth values ​​in the Western Balkan countries is that non-financial wealth is prevalent over ¾ of the entire total wealth value of adults. This feature of the Balkan countries is the main difference with the developed countries of the EU or even those that are members of the OECD.

Tirana, 26th February 2020

[1] National net wealth, also known as net worth, is the sum of the total value of a country’s assets minus its liabilities. This value is an important indicator of a country’s ability to borrow and keep costs controlled and is influenced not only by real estate prices, equity market prices, exchange rates, liabilities and incidence in a country. instead of the adult population, but also from human resources, natural resources and capital, as well as technological developments, which can create new assets.

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