VIENNA, October 19, 2023 – After slowing in 2023, economic growth in the Western Balkans is expected to accelerate moderately in 2024 to reach 3%, amid continued recovery in the European Union, the region’s main trading partner. , and lower inflation which should help strengthen disposable income and support consumption, according to the new World Bank report Regular economic report on the Western Balkansreleased today.
The regional growth rate in 2024, although faster than in 2023, could be 0.1% lower than the World Bank forecast in the previous edition of the report in April. The growth projection for 2025 remained unchanged at 3.5 percent.
Painting. Western Balkans Outlook, 2020-25
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Percentage point differences compared to April 2023 projections |
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| 2020 | 2021 | 2022 | 2023e | 2024F | 2025F | 2023e | 2024F | 2025F | |
| Real GDP growth (percentage) | |||||||||
| Albania | -3.3 | 8.9 | 4.8 | 3.6 | 3.2 | 3.2 | 0.8 | -0.1 | -0.1 |
| Bosnia Herzegovina | -3.0 | 7.4 | 3.9 | 2.2 | 2.8 | 3.4 | -0.3 | -0.2 | -0.1 |
| Kosovo | -5.3 | 10.7 | 5.2 | 3.2 | 3.9 | 4.0 | -0.5 | -0.5 | -0.2 |
| North Macedonia | -4.7 | 3.9 | 2.1 | 1.8 | 2.5 | 2.9 | -0.6 | -0.2 | 0.0 |
| Montenegro | -15.3 | 13.0 | 6.4 | 4.8 | 3.2 | 3.1 | 1.4 | 0.1 | 0.2 |
| Serbia | -0.9 | 7.5 | 2.3 | 2.0 | 3.0 | 3.8 | -0.3 | 0.0 | 0.0 |
| Western Balkans six | -3.0 | 7.8 | 3.3 | 2.5 | 3.0 | 3.5 | -0.1 | -0.1 | 0.0 |
The recovery and return to pre-pandemic levels is accompanied by differences between countries. Growth in Montenegro and Albania was stronger than expected in 2023, driven, among other factors, by a strong tourism season, and could decelerate slightly in 2024. Growth in Serbia, North Macedonia, Bosnia and Herzegovina and in Kosovo is expected to accelerate in 2024. 2024, supported by an increase in consumption and investment.
“Despite multiple shocks, the Western Balkans was able to grow, create jobs and reduce poverty, demonstrating the strength of the region’s economic fundamentals,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans. . “What is encouraging is that the Western Balkans continue to make progress in catching up with the advanced economies of the European Union. However, convergence is occurring at an uneven pace, requiring targeted reforms to consolidate the recovery towards sustainable growth.”
In 2023, the Western Balkans labor market continued to strengthen, against all expectations. The average employment rate in the region reached a new all-time high at almost 48 percent with an additional 103,000 jobs created between mid-2022 and mid-2023. Albania, Bosnia and Herzegovina and Montenegro recorded the largest gains. At the same time, labor shortage remains one of the main concerns raised by businesses in the Western Balkans. Despite the recent dynamics of the post-pandemic years, labor force participation remains low and, combined with significant gender disparities, hampers further poverty reduction.
The region must not only overcome barriers to greater labor market participation, but also accelerate economic convergence with Europe’s more advanced economies, the report said. These efforts must be complemented by a faster green transition and more investments to strengthen resilience to natural disasters, particularly in the agricultural sector.
“Agriculture is one of the sectors most affected by droughts, shortened seasons and unpredictable weather conditions. Protecting agriculture from natural hazards and making it more sustainable could enable Western Balkan economies to continue to increase their agricultural productivity in the face of climate change headwinds and be able to produce more high-quality food for domestic needs, but also for exports, including to the EU,” said Natasha Rovo, senior economist at the World Bank and lead author of the report. “This requires improved public policies and investments to drive broad adoption of climate-smart technologies and practices by farmers, supported by stronger public institutions essential for sustainable agricultural growth.”
Even though the size of the agricultural sector in the region is decreasing, it remains very relevant, employing for example between seven and 35 percent of the population in the six countries. According to the report, green agriculture therefore offers the opportunity to boost the productivity, competitiveness and resilience of the sector, by effectively using available public funds, knowledge and innovation.