Ida Ismail
In one latest World Bank report It is said that economic growth in the Western Balkans is expected to remain slow during 2026-2027, reflecting a number of internal and external challenges that are directly affecting the region's long-term prospects.
According to the World Bank, the impact of geopolitical tensions, particularly the conflict in the Middle East, along with persistent inflation, are increasing the cost of living and limiting citizens' purchasing power.
One of the biggest challenges highlighted in the report is the labor market. Although unemployment has fallen, this is not necessarily related to the creation of new jobs, but more to emigration and the aging of the population. As a result, the economy faces a labor shortage, while a significant part of the working-age population remains outside the labor market.
To maintain the pace of reforms in a region facing growing labor shortages, expanding labor market participation is essential, the latest World Bank report says.
The Regular Economic Report for the Western Balkans projects that the combined economic growth of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia will reach 2.8% in 2026, which is 0.3 percentage points lower than the previous forecast. Economic growth is expected to accelerate modestly to 3.2% in 2027.
“Global uncertainty and geopolitical tensions are holding back economic growth in the Western Balkans, and rising prices are directly affecting household budgets,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans.
"While policymakers are using short-term fiscal measures to cushion the impact of these pressures on households and businesses, our report shows that the key to long-term economic progress is jobs. The Western Balkans has a large pool of untapped talent, women, young people and individuals who want to work but face barriers," she said.
According to the report, the population in the Western Balkans is aging faster than almost anywhere else in Europe. Within the next decade, at least one in five people in the region will be over the age of 65. Meanwhile, working-age people, including graduates and unskilled workers, are seeking better wages and prospects abroad.
The paradox lies in the fact that even though labor shortages are most pronounced in key sectors, many people still remain unemployed or have completely given up looking for work.
The report highlights underutilized human capital: Women, young people and others who want to work but face barriers to entering the labor market. If the labor force participation rate across the region were the same as that of similar countries in the European Union, this would result in more than 2.8 million additional workers. Just by including women in the labor market, annual economic growth could be increased by 0.35 percentage points.
The report highlights the need to make employment a more attractive alternative, through tax and benefit policies, as in many cases staying at home remains a financially safer choice.
The report also notes the need for affordable childcare and eldercare Services, better vocational training, and jobs that offer flexibility and decent working conditions, including for online platform workers.
“Faster reforms are needed as part of the EU accession process, greater investments in human capital and digital infrastructure, and mobilization of private capital to accelerate investment and create jobs,” said Massimiliano Paolucci, World Bank Group Country Manager for Albania.
Only through increased employment and broader inclusion in the labor market can more sustainable economic development be ensured for the region, bringing it closer to the European Union countries.acqj.al
