Social Security Policy and Pension Reforms in the Western Balkans

Abstract

Despite recent economic growth, the countries of the Western Balkans share a catalogue of social problems ranging from high unemployment, low participation rates, falling birth rates, ageing populations, severe poverty, and migration of many young and skilled people. This article tracks the similarities and differences in the responses of the countries of the Western Balkans to these difficulties, with a focus on pension systems reform. It shows how social protection systems have been weakened by efforts to cut public expenditure and reduce budget deficits and how, following the advice of international organisations and policy advisers, several countries have introduced partially privatised three-pillar pension systems in an environment of underdeveloped capital markets. It discusses the features of the new reformed pension systems, and reviews the systems in those countries which have not yet adopted such reforms. It highlights the problems and risks facing the partially privatised pension schemes. The article also considers the context for the different approaches adopted in the region. It concludes that at the present state of their economic transition and development, the late reforming countries would be better advised to focus on improving the efficiency of their existing arrangements, and on the regional coordination of their social security and pension systems, rather than engaging in radical privatisation in pursuit of uncertain benefits.