World Bank on the Western Balkans: Employment strategies must change, working-age population to drop by 20 percent by 2050

(Patria) - Economic growth in the Western Balkans is expected to moderately accelerate in 2026, while a more concrete recovery is forecast for 2027, driven by stronger exports and investments, along with easing global economic uncertainty. To sustain progress in narrowing the development gap with the European Union, the region must focus on creating quality jobs, according to a new World Bank report released today.

Economic growth in the Western Balkans slowed during 2025, as inflation led to reduced consumption, while heightened uncertainty constrained trade and investment, despite solid growth in wages and credit. Fiscal policy, although slightly relaxed, remained disciplined, with the deficit below 3% and public debt continuing its downward trajectory.

According to the forecasts of the Regular Economic Report for the Western Balkans, the combined economic growth of Albania, Bosnia and Herzegovina, Montenegro, Kosovo, North Macedonia, and Serbia will reach 3% in 2025, which is 0.2 percentage points lower than previous projections. Growth is expected to accelerate to 3.1% in 2026, and then to 3.6% in 2027.

"The Western Balkans is making progress and narrowing the development gap with more advanced EU economies, but economic growth remains insufficient to meet citizens' expectations," said Xiaoqing Yu, World Bank Director for the Western Balkans.

"To help the region become a modern economy, it is important to consider changes in employment strategies, such as encouraging greater labor market participation, improving citizens' skills, and strengthening firms through digital enhancements," she concluded.

According to the findings of this report, the Western Balkans faces a labor market paradox: some sectors experience a persistent shortage of workers, yet unemployment rates remain high – over 10 percent – and labor force participation is low, below 55 percent, especially among women, youth, and older adults. Demographic trends amplify these challenges. The working-age population has already significantly declined, and projections indicate a drop of nearly 20 percent by 2050. If current trends in population, economic growth, and labor markets continue, the region could face a shortage of over 190,000 workers over the next five years.

To "unlock" economic growth, the Western Balkans must invest in basic infrastructure crucial for job creation.

Measures include strengthening the education and healthcare systems and increasing labor force participation rates, particularly among women. Investment in transport, environmental, and energy infrastructure will help connect firms and citizens faster and more efficiently, improving productivity. Additionally, business and private sector growth require strengthening public administration and supporting policies that foster economic growth, alongside creating a predictable regulatory environment. Promoting competition in key sectors such as energy and transport, reforming state-owned enterprises, simplifying regulations, and supporting innovative startups will enable firms to expand their operations and improve service quality.

Finally, mobilizing private capital should support the economy through financing, investments, guarantees, and insurance, while also encouraging digital and green upgrades.