How do the countries of the Western Balkans fare when it comes to structural reforms, digitalisation, and renewable energy sources? What is the political impact on the economy, and what is the situation with brain drain and salaries?
Mostly bad and with a lot of room for improvement – that’s the summary of the analysis by the German Aspen Institute titled “Structural Changes in the Western Balkans.” The publication, which DW was the first to see, is the epilogue of a conference on this topic held in Tirana in October.
The moment is delicate, experts and editors of this paper write – the European Union has its own troubles, but geopolitical reasons dictate its expansion into the region. And yet, Serbia and its neighbouring countries are still not ready in many areas that affect the economy.
“After years of stagnation, there is now a real opportunity for the Western Balkans to progress in the EU accession process,” writes Gunther Krichbaum, State Minister at the German Federal Foreign Office, in the foreword.
Despite geopolitical instability, the war in Ukraine, and the rise of authoritarianism, progress is clearly visible. “I encourage everyone to join efforts and undertake reforms – especially in the fight against corruption, organised crime, and highlighting democratic values,” says Krichbaum.
The EU is an anchor, but it has its own struggles
The Aspen analysis highlights the low productivity of economies in the region as a key problem – and this is evident in the struggles with competition from the EU as the region approaches the single market.
Furthermore, poor infrastructure that further fragments an already small region, then demographic problems, the emigration of young and skilled workers, and dependence on coal “which requires an expensive transition that many governments are only just beginning to address.”
“At the same time, the region is facing a complex geopolitical environment shaped by competing external actors, which puts additional pressure on already fragile institutions and further complicates efforts to align with EU standards,” the institute’s analysis states.
It is added that the EU accession process still remains the “most important external anchor,” but it is difficult to translate into concrete steps because it is directly linked to the reform of the EU itself. This refers to scepticism about EU enlargement in some member states, as consensus decisions are already difficult to make in Brussels, even with 27 countries.
What does the region export?
Matteo Bonomi from the Institute for International Affairs in Rome analyses the structure of economies in his article.
For example, he writes about Serbian subsidy policy, which “attracted multinational companies and boosted exports,” but mostly in the “less sophisticated” sector. “Negligible,” writes Bonomi, is the share of high-tech products in Serbian exports, as, in the period from 2005 to 2020, it increased from 2.1 to 6.8 percent.
In terms of Bosnia and Herzegovina (BiH), he writes that the brakes are “permanent political crises and questioning of legitimacy,” which leads to slow reforms. “High emigration exacerbates the shortage of human capital and increases structural vulnerability relative to other countries”, Bonomi adds.
Otherwise, the paper repeatedly highlights the problem that the region and, in particular, BiH have with the outflow of labour. It is stated that about 50 percent of all citizens do not live in BiH.
The current Regional Growth Plan (2024-2027), which is expected to bring a total of six billion euros from Brussels, Bonomi calls “an attempt to inject fresh momentum into a region that has long languished in the EU waiting room.”
And that plan has many flaws, which Bonomi lists, and he recommends that the EU prepare significantly more money. The funds are, he writes, “modest” compared to the funds available to EU members.
There’s no one to work?
In the next text of the publication, Branimir Jovanović from the Vienna Institute for International Economic Studies writes that the labour market situation in the Western Balkans has improved in the last 15 years, with unemployment falling from 25 to 11 percent.
But there are catches. First, some groups are doing much worse than the unemployment, employment, and economic activity averages indicate. Three groups stand out here: women, young people, and those with basic education.
Second, Jovanović writes, salaries are still “far below EU levels” – making up between one and two-fifths of the EU average.
Thirdly, there are dramatic differences between regions in the unemployment rate. For example, while Belgrade has only 6.2 percent unemployment, the south and east of Serbia have twice as many unemployed people. The situation is similar in BiH, where unemployment in the Republic of Srpska (9.1 percent) is noticeably lower than in the Federation of BiH (15 percent) and especially in Brčko District (21.1 percent).
The most extreme example in this regard is Montenegro, where only 3.1 percent of the coastline population is unemployed, while in the north, the continental part of the country, this figure is ten times higher (31.9 percent).
Jovanović points out a problem that can be summarised as follows: some jobs have no one to do them, while no one wants to do others.
“Employers are increasingly reporting difficulties in finding workers with both low and high qualifications,” it writes. When it comes to lower qualifications, one of the problems is precisely “persistently low wages and desperate working conditions.” And there are few highly qualified people, and furthermore, they are “continuously emigrating.”
Coal still dominates
Ana-Maria Boromisa from the Zagreb Institute for Development and International Relations dedicated her analysis to the energy sector. It is striking that it is heavily dependent on coal, which is responsible for between 55% (Albania) and 90% (Kosovo) of harmful gas emissions.
“Most of the electricity in the region (except for Albanian hydropower) is generated from lignite, which contributes to the highest levels of pollution in Europe,” writes Boromisa.
This is reminiscent of the goal to establish a “price” for carbon dioxide in the region by 2030. Otherwise, she says, the region will face high costs when exporting electricity to the EU.
Regarding Serbia, Boromisa recommends boosting the capacity of wind farms and solar power plants, diversifying gas sources and interconnectors, and beginning a gradual phase-out of coal. This requires investments estimated at 14 billion euros over the next decade.
Boromisa praises the Trans-Balkan Energy Corridor project, which is intended to connect Serbia, Bosnia and Herzegovina, and Montenegro. This can ensure that “excess energy from renewable sources in one country compensates for deficits in another.”
In addition to everything that has been mentioned in the report, something else looms – the rule of law. This is also emphasised by the publication’s editors, who warn that “institutions often face political and economic pressure that allows rules to be circumvented.”
It’s not enough, they add, just to pass laws, but they must also be implemented. And to make it clear that they apply to everyone.
(DW, 15.12.2025)
https://www.dw.com/sr/%C5%A1ta-sve-ko%C4%8Di-zapadni-balkan/a-75153657