After the slowdown in 2023, a moderate acceleration of economic growth in the Western Balkans is expected to 3 percent in 2024, in conditions of further recovery in the European Union. This was published today in the Regular Economic Report of the World Bank.
Lower inflation should contribute to the growth of disposable income and support consumption, the report states.
The pace of growth that the region will record in 2024 will be faster than in 2023, but the growth rate may be 0.1 percent lower than that forecast by the World Bank in the previous, April edition of this report. The growth projection for 2025 remained unchanged at 3.5 percent.
However, there are differences between countries in the speed of recovery and return to levels achieved before the pandemic. Growth in Montenegro and Albania in 2023 was stronger than expected, which was contributed, among other things, by a successful tourist season, and in 2024 it may partially slow down. According to projections, growth will accelerate in 2024 in Serbia, North Macedonia and Bosnia and Herzegovina, as well as in Kosovo, under the influence of increased consumption and investments.
“Despite multiple shocks, the countries of the Western Balkans managed to record growth, create new jobs and reduce the level of poverty, which points to strong basic economic indicators of this region. It is encouraging that the Western Balkans continues to make progress in catching up with the more developed economies of Western Europe. However , convergence is occurring at an uneven pace, which requires targeted reforms to consolidate the recovery and grow into sustainable growth,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans.
Despite expectations, the labor market in the Western Balkans continued to strengthen in 2023. The average employment rate in the region reached a new historical high of nearly 48 percent, and 103,000 new jobs were created from mid-2022 to mid-2023. Progress was strongest in Albania, Bosnia and Herzegovina and Montenegro. At the same time, the lack of labor is still among the most significant problems cited by businessmen in the Western Balkans. Despite the recent gains registered in the post-pandemic years, labor force participation is still low, which, along with a deep gender gap, makes further poverty reduction difficult.
This region must not only remove obstacles to greater labor force participation, but also accelerate economic convergence with the more advanced economies of Europe, the report said. In addition to these efforts, a faster green transition and a greater volume of investment in increasing resistance to natural disasters are needed, among other things in agriculture.
“Agriculture is one of the sectors most significantly affected by droughts, shortening seasons and unpredictability of weather patterns. If they protect agriculture from natural risks and make it more resilient, the economies of the Western Balkans could continue to increase agricultural productivity despite the adverse impact of climate change and be able to sustainably produce higher quality food for domestic needs, but also for export, among others to the EU. This requires the improvement of public policies and investments to encourage the widest possible adoption of climate-smart technologies and practices among farmers, supported by stronger public institutions that are of crucial importance for the sustainable growth of agriculture”, said Natasha Rovo, senior economist of the World Bank and one of the authors of the report.
Although the agricultural sector in the region is shrinking, it is still very relevant: for example, in these six countries, agriculture employs between seven and 35 percent of the population. The greening of agriculture therefore offers an opportunity to increase the productivity, competitiveness and resilience of this sector, through more efficient use of available public funds, knowledge and innovation, the report states.
According to the new estimate, the growth of Bosnia and Herzegovina in 2024 should be 2.8 percent, and in 2025, 3.4 percent. Growth in 2023 is 2.2 percent. As for the other countries of the region, for 2024 it was estimated that the growth in Albania will be 3.2 percent, Montenegro 3.2 percent, Kosovo 3.9 percent, North Macedonia 2.5 percent and Serbia 3 percent, Klix.ba reports.
