Western Balkans Regular Economic Report : Adjusting to Shocks, Mobilizing Untapped Potential

Overview & Synopsis

The Western Balkans Regular Economic Report No. 29 analyzes recent economic developments, medium‑term prospects, and key policy challenges across the six Western Balkan economies, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia. The report finds that economic growth slowed in 2025 amid weakening domestic demand, persistent inflationary pressures, and heightened geopolitical uncertainty stemming from the conflict in the Middle East. While fiscal and credit policies helped sustain activity, external vulnerabilities widened, and labor‑market constraints intensified due to demographic pressures, emigration, and skills mismatches. The outlook remains cautiously positive over the medium term, supported by gradual external recovery, but downside risks dominate. A special focus is placed on mobilizing underutilized human capital, particularly women and youth, highlighting the need for reforms in labor markets, care services, skills development, and job creation to support productivity, resilience, and inclusive growth across the region.