"Western Balkans economy slows" - WB: Job creation essential to support growth
In its Regular Economic Report for the Western Balkans, the World Bank notes that growth slowed this year as inflation dampened consumption growth and rising uncertainty dampened trade and investment, despite strong wage and credit growth. Fiscal policy, although somewhat eased, remained disciplined, with the deficit below 3% and public debt continuing its downward trajectory.
The report forecasts that the combined economic growth of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia will reach 3.0% in 2025, which is 0.2 percentage points lower than previous forecasts. Growth is expected to accelerate to 3.1% in 2026 and 3.6% in 2027.
"Economic growth in the Western Balkans is projected to accelerate at a moderate pace in 2026 and recover more strongly in 2027, supported mainly by increased exports and investment, as uncertainties in the global economy ease," the World Bank underlines.
But, to support progress towards approximation with the European Union, the international financial institution suggests that the region should focus on creating better quality jobs.
The Western Balkans faces a labor market paradox: labor shortages continue to be present in some sectors, in parallel with high unemployment rates, above 10%, and low labor force participation, which remains below 55%, especially for women, youth, and the elderly.
Demographic trends are further exacerbating these challenges. The working-age population has declined significantly and is projected to shrink by almost 20 percent by 2050. If current population, economic growth, and labor market trends continue, the region could face a shortage of more than 190,000 workers over the next five years.
To pave the way for economic growth, the World Bank says the Western Balkans must invest in basic infrastructure, which is essential for job creation. This includes strengthening education and health systems and increasing labor force participation - especially for women. Investment in transport, environmental and energy infrastructure would help connect businesses to workers faster and more efficiently, thereby improving productivity.
Second, strengthening governance and supporting policies for business creation, along with a predictable regulatory environment, are essential for the functioning and growth of the private sector. Promoting competition in key sectors such as energy and transport, reforming state-owned enterprises, simplifying regulations, and supporting innovative new businesses (start-ups) will enable businesses to expand and improve the quality of services.
Finally, private capital mobilization should support businesses with financing, investments, guarantees and insurance, while also encouraging the use of the latest digital and green technologies.
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