EXTERNAL SOLVENCY MANAGEMENT OF SELECTED BALKAN COUNTRIES

Abstract

The authors investigate the external solvency of three Balkan countries, two of which are socalled
late transition countries (Bosnia and Herzegovina and Serbia), while Bulgaria is a country
that has completed the transition and become a member of the European Union since 2007. Two
indicators of external solvency are analysed: External debt/gross national income (GNI) and
External debt/export of goods and services in the period 1997-2021. Moderate external
indebtedness of these countries at the end of 2021 was established. Specifically, the external
debt/GNI ratio for Bosnia and Herzegovina was 58.08%, for Serbia, 67.83%, and for Bulgaria,
57.52%. At the end of 2021, the second indicator of external solvency was within the permissible
limits, i.e., it was well below 220%, which the World Bank marked as the upper limit of
indebtedness. The value of this parameter was quite high for BiH (131%) and Serbia (122%), while
for Bulgaria was incomparably lower (87%). An important factor of a country's external solvency
is the Net inflow of foreign direct investments (FDI). The available data indicate that since 2010,
Serbia has been much more successful in attracting FDI compared to the other two Balkan
countries. Also, research on the correlation between GDP growth rate and FDI (as a share of GDP)
for Serbia shows a statistically more significant positive relationship compared to Bosnia and
Herzegovina and Bulgaria.