Proces izgradnje ekonomske elastičnosti u malim državama
The Construction of Economic Resilience in Small States

Summary/Abstract: While small states are very heterogeneous, several macroeconomic problems characterize them starting from a high level of public debt and week institutional capacities, poor fiscal balance, insufficient development of financial sector, to the imperfect banking market and a need for establishing adequate political and legal framework. There are two conventional ways for defining small states and those are the quantitative and qualitative approach. Nevertheless, we can say that there is no single definition of small state because the size is relative notion. Because of their small size, these countries cannot take advantage of economies of scale. Despite their heterogeneity and their differences, they share a number of common features and significant development challenges such as distance and isolation, vulnerability to natural disasters, economy openness, and the difficult access to foreign capital, poverty, high fixed costs in public and private sectors, high trade costs, relatively narrow and shallow financial sector and others. They are also characterized by a high degree of economic openness, export concentration and high dependence on strategic imports such as imports of food, fuel and industrial goods. These factors are in relation to their economic vulnerability, as well as to their weaker economic resilience compared to the larger countries. Economic vulnerability refers to the susceptibility of the observed state to harmful effects of external economic shocks. On the other hand, economic resilience refers to the extent to which a state’s economy can withstand, reject or influence the negative effects of such economic shocks. The aim of this paper is to try to provide a comprehensive framework for examining the challenges that small states are facing, as well as to point out concrete proposals, possible solutions and strategic ways of action with the aim of constructing and strengthening economic resilience of small states. At the end of the paper, it points out the significance of all the variables (macroeconomic stability, market efficiency, good political governance and quality of institutions, social development and environment governance) that may affect their policy of constructing and developing economic resilience.

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