Economic growth in the Western Balkans slowed significantly in the first quarter of 2025, according to a report by the European Commission.
The region’s real GDP growth fell to 2.3 percent, from 3.3 percent in the previous quarter.
All countries recorded lower growth than in the previous three months, and Serbia, the largest economy in the region, had the largest slowdown in output growth, from 3.3 to two percent.
However, North Macedonia, Albania and Kosovo were above the three percent mark, according to the report on the economies of candidate countries or potential candidates for EU membership.
Economic growth was driven by domestic demand. Consumption remained the key contributor to growth in the first quarter of 2025. Household consumption was accompanied by continued high wage growth across the region. It further states that trade dynamics were generally marked by higher imports relative to exports, leading to negative contributions from international trade to GDP growth.
The unemployment rate fell in most countries in the region in the first three months of 2025. Unemployment in the region was at a historically low level, but still higher than in the EU.
In line with the decline in economic activity, employment growth slowed to 0.2 percent in the Western Balkans.
In the four quarters to March, net foreign direct investment inflows fell in most countries in the region, especially in North Macedonia and Serbia, compared to 2024.
Foreign exchange reserves decreased in some countries in the region.
Average annual inflation accelerated to 3.7 percent in the first quarter of 2025.
Consumer price inflation increased further in some economies in the second quarter of this year, ranging from 2.3 percent in Albania to 4.3 percent in Montenegro.
Despite strong revenue growth, budget expenditures grew at a faster pace, and fiscal balances deteriorated in almost all Western Balkan economies in the first five months of 2025, except for North Macedonia.
In some economies (Serbia, Kosovo), this is partly due to a strong increase in capital spending compared to the previous year.
In Turkey, annual economic growth slowed further to two percent in the first quarter of 2025.
Annual consumer price inflation in the country fell to 35 percent in June, the lowest level since November 2021, mainly due to a decrease in food prices.
