Real GDP growth of 3,1 percent in 2025, 3 percent in 2026, and 3 percent in 2027 are the World Bank’s estimates for the country. According to the latest report, the difference in percentage points from the projections in the spring report for 2025 is in the lead and reaches 0,4, 0,3, and 0,2 for these three years.
Estimates and projections reflect data available as of September 20, 2025.
Economic growth in the Western Balkans is expected to accelerate at a moderate pace in 2026 and recover more strongly in 2027, supported mainly by increased exports and investment, as uncertainties in the global economy ease. To sustain progress towards convergence with the European Union, the region needs to focus on creating better quality jobs, according to the latest World Bank report published today.
In 2025, economic growth in the Western Balkans slowed as inflation dampened consumption growth and rising uncertainty held back trade and investment, despite strong wage and credit growth. Fiscal policy, while somewhat eased, remained disciplined, with the deficit below 3% and public debt continuing its downward trajectory.
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 3.0 percent in 2025, which is 0.2 percentage points lower than previous forecasts. Growth is expected to accelerate to 3.1 percent in 2026 and 3.6 percent in 2027.
“The Western Balkans are making progress in narrowing the development gap with the most advanced economies in the European Union, but growth remains insufficient to meet the aspirations of citizens,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans. “For the region to become a modern economy, it is important to reformulate employment strategies – such as boosting labor market participation, improving the skills of the population, and growing businesses through the use of the latest digital technologies.”
According to the report, the Western Balkans faces a labor market paradox: labor shortages continue to be present in some sectors, in parallel with high unemployment rates – above 10 percent – and low labor force participation, which remains below 55 percent, especially for women, youth, and the elderly.
Demographic trends are further exacerbating these challenges. The working-age population has declined significantly and is projected to shrink by almost 20 percent by 2050. If current population, economic growth, and labor market trends continue, the region could face a shortage of more than 190,000 workers over the next five years.
To pave the way for economic growth, the Western Balkans must invest in basic infrastructure, which is essential for job creation. This includes strengthening education and health systems and increasing labor force participation – especially for women. Investment in transport, environmental and energy infrastructure would help connect businesses to workers faster and more efficiently, thereby improving productivity.
Second, strengthening governance and supporting policies for business creation, along with a predictable regulatory environment, are essential for the functioning and growth of the private sector. Promoting competition in key sectors such as energy and transport, reforming state-owned enterprises, simplifying regulations, and supporting innovative new businesses (start-ups) will enable businesses to expand and improve the quality of services.
Finally, private capital mobilization should support businesses with financing, investments, guarantees and insurance, while also encouraging the use of the latest digital and green technologies.