The region must focus on creating quality jobs to catch up with the EU.
Economic growth in the Western Balkans is poised to pick up modestly in 2026 before gaining momentum in 2027, buoyed by stronger exports and investment as global uncertainty recedes. Yet sustaining the region’s convergence with the European Union demands a sharper focus on generating quality employment, according to a World Bank report published earlier this month.
This year saw growth across the six economies—Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia—slow to three per cent, some 0.2 percentage points below earlier forecasts. Inflation sapped consumer spending whilst heightened uncertainty crimped trade and investment, despite robust wage and credit expansion. Fiscal policy remained disciplined, with deficits held below three per cent and public debt on a downward path. Growth is expected to quicken to 3.1 per cent in 2026 and 3.6 per cent in 2027.
“The Western Balkans are making progress in narrowing the development gap with more advanced European Union economies, but growth remains insufficient to meet people’s aspirations,” observes Xiaoqing Yu, the World Bank’s division director for the region. “To help the region become a modern economy, it is important to rethink jobs strategies—such as encouraging greater labour market participation, improving skills of the population, and boosting firms through digital upgrades.”
The report highlights a labour market paradox: certain sectors face shortages even as unemployment exceeds 10 per cent and labour force participation languishes below 55 per cent, particularly among women, the young and older workers. Demography compounds the problem. The working-age population has already shrunk markedly and is projected to contract by nearly a fifth by 2050. On current trends, the region could face a shortfall exceeding 190,000 workers within five years.
To unlock growth, the Western Balkans must invest in the foundations of job creation: strengthening education and health systems, and raising labour force participation, especially among women. Better transport, environmental and energy infrastructure would connect firms and workers more swiftly, boosting productivity.
Second, improving governance and creating a predictable regulatory environment are essential to allow the private sector to flourish. Fostering competition in energy and transport, reforming state-owned enterprises, streamlining regulations and supporting innovative start-ups would enable businesses to expand and improve services.
Finally, mobilising private capital—through financing, investment, guarantees and insurance—should support firms whilst encouraging digital and green modernisation.
Photo: Dreamstime.
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