Economic growth in the Western Balkans is projected to moderately accelerate through 2025, driven by increased consumption and investment, according to the latest report from the World Bank. The region, comprising Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia, is expected to see a collective growth of 3.7% in 2025, reflecting a positive outlook amid global economic uncertainties.

Key Takeaways

  • Projected Growth: 3.7% in 2025, up from 3.3% in 2024.
  • Positive Trends: Increased purchasing power and rising wages are boosting consumption.
  • Challenges Ahead: Vulnerability to external economic shocks and the need for structural reforms.
  • Migration Opportunities: Effective management of migration can stimulate economic growth.

Economic Outlook for the Region

The World Bank’s report highlights that while the Western Balkans are experiencing positive economic trends, they also face significant challenges. The projected growth of 3.7% for 2025 marks a slight upward revision from earlier estimates, primarily due to improved domestic factors and a gradual recovery in the European Union, which is expected to bolster exports from the region.

Despite this optimistic forecast, the region remains susceptible to global economic fluctuations. Factors such as slower economic activity in the EU and heightened global trade uncertainties could negatively impact growth, reducing trade in goods and services, investments, and remittances.

Factors Influencing Growth

Several key factors are shaping the economic landscape in the Western Balkans:

  1. Global Trade Uncertainty: Slower economic activity in the eurozone may hinder trade and investment.
  2. Domestic Uncertainty: Increased uncertainty within the region’s economies could affect growth prospects.
  3. Structural Reforms: The need for comprehensive reforms is critical to enhance economic resilience and productivity.
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Recommendations for Sustained Growth

To maintain economic momentum, the report suggests several strategies:

  • Diversification of Growth Sources: Countries should explore new avenues for economic growth to reduce dependency on external factors.
  • Accelerating EU Accession Reforms: Implementing reforms such as joining the Single Euro Payments Area (SEPA) and streamlining cross-border trade can enhance business confidence and attract investments.
  • Adapting to Climate Change: As the region faces rising temperatures and extreme weather events, reforming social protection systems and employment services is crucial to prepare the workforce for new opportunities in a low-carbon economy.

Migration as an Economic Driver

The report emphasizes that nearly one in four individuals from the Western Balkans currently reside abroad. While emigration poses challenges such as labor shortages, it also presents opportunities to leverage migration for economic benefits. Effective management of migration can:

  • Alleviate poverty and stimulate exports.
  • Attract investment and create jobs.
  • Facilitate knowledge transfers and enhance skills among the local workforce.

To maximize the benefits of migration, the report recommends:

  • Developing skills training and mobility programs in partnership with destination countries.
  • Enhancing migrant protections to mitigate risks and incentivize return.
  • Utilizing digital tools for effective migration management and policymaking.

Conclusion

The Western Balkans are demonstrating resilience in the face of global economic challenges. While growth is expected to accelerate moderately in 2025, the region’s ability to adapt through structural reforms and diversification will be key to sustaining economic momentum. As countries navigate these uncertainties, proactive measures will be essential to ensure long-term stability and growth in the region.

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Sources

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