VIENNA, April 28, 2025 – Economic growth in the Western Balkans is projected to slow down modestly in 2025 owing to weaker external demand and economic uncertainty arising from evolving global trade policies which could affect business and consumer confidence, according to the Western Balkans Regular Economic Report released today by the World Bank.
The World Bank forecasts that the combined economic growth of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia will reach 3.2% in 2025, 0.5 percentage points below previous projections. Growth is anticipated to accelerate to 3.5% in 2026.
"We are seeing some positive economic trends in the Western Balkans that underscore the region’s resilience and should underpin firm economic growth. Lower inflation and rising wages support consumption, public investments are beginning to pick up," says Xiaoqing Yu, World Bank Division Director for the Western Balkans. "On the other hand, we are witnessing increased domestic uncertainty in several economies of the Western Balkans. Slower economic activity in the European Union and heightened global trade uncertainty could also negatively impact the growth outlook in the region."
Global trade uncertainty is likely to affect the Western Balkans primarily as a result of slowing economic activity in the euro zone. This slowdown could reduce trade in goods and services, as well as investments and remittances.
The report suggests that during periods of uncertainty, diversifying growth sources and renewing the structural reform agenda are the most effective strategies for maintaining economic resilience. Key measures include eliminating labor market barriers—including those affecting women—enhancing regional economic integration, improving governance standards, and increasing market competition to boost productivity and support long-term growth.
Additionally, for Western Balkans countries, faster implementation of EU accession reforms—such as joining the Single Euro Payments Area (SEPA) and introducing “green lanes” to streamline cross-border trade—could further enhance business confidence, attract investment, and spur job creation.
The report also emphasizes how rising temperatures and extreme weather events, coupled with the transition to a low-carbon economy, are reshaping sectoral employment patterns in the region, requiring significant workforce adaptation. The six Western Balkan economies should prioritize reforming their social protection systems and employment services. This would help their labor forces cope with adverse weather events such as floods, droughts, and wildfires, and be ready for new employment opportunities driven by the green transition.
Strengthening labor income protection systems to respond to employment shocks and enhancing the flexibility of social protection systems would help prevent individuals from falling into poverty. Additionally, reskilling workers for green jobs would help respond to the evolving demand for skills, promoting productivity and growth.
For more information and previous editions of the Western Balkans Regular Economic Report, click here.
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Contacts:
In Vienna: Filip Kochan, fkochan@worldbank.org
Belgrade: Gordana Filipovic, gfilipovic@worldbankgroup.org
Pristina: Lundrim Aliu, laliu1@worldbank.org
Skopje: Anita Bozinovska, abozinovska@worldbank.org
Sarajevo: Jasmina Hadzic, jhadzic@worldbank.org
Tirana: Ana Gjokutaj, agjokutaj@worldbank.org
