Publication: An Economic Agenda to Accelerate Convergence of the Western Balkans with the European Union
Loading...
Date
2025-03-17
ISSN
Published
2025-03-17
Editor(s)
Abstract
The enlargement of the European Union towards the Western Balkans is experiencing unprecedented dynamism, supported by the launch of a tailored Euro 6 billion growth plan. This renewed momentum offers an important opportunity for the Western Balkans to accelerate economic convergence with the standards of living of their European peers, which has stalled. Drawing on the development trajectory of the Western Balkans and selected New Member States during 1991-2023, and simulations measuring the impact on gross domestic product (GDP) of specific policy reforms, this policy note puts forward a new economic agenda for the Western Balkans - to be implemented in synergy with the growth plan. The analysis shows that if these countries can reach the levels of New Member States with respect to the strength of institutions, level of investment, volume of trade, and quality of education, their growth rate can as much as double.
Link to Data Set
Citation
“Pontara, Nicola; Medic, Pavle; Relic, Ana; Richard, Richard. 2025. An Economic Agenda to Accelerate Convergence of the Western Balkans with the European Union. © World Bank. http://hdl.handle.net/10986/42962 License: CC BY-NC 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication The Economic Effects of Market Integration in the Western Balkans(World Bank, Washington, DC, 2023-07-11)In the Western Balkans, trade and transport policy reforms that reduce waiting time at the border by just three hours are equivalent to removing a value-based tariff of 2 percent. Reform gains are maximized when they are coordinated across economies and implemented jointly: cross-border coordination in the implementation of the package of national single window and other trade facilitation reforms would generate 8 percent higher gains than if each economy were to carry out the reforms autonomously. The impacts of trade reforms and improvements in road infrastructure would be further amplified if Western Balkan economies belonged to the European Union, which would result in an additional 6 percent boost to welfare. Moreover, the accession of Western Balkan economies to the European Union would have positive spillover welfare effects for countries such as Croatia, Bulgaria, Romania, and Hungary, and negligible effects for other EU members.Publication European Integration and Income Convergence : Lessons for Central and Eastern European Countries(Washington, DC: World Bank, 2001-08)The prospect of enlarging the European Union (EU) to Central and Eastern European countries with income levels far below those of present members, questions how, and when the candidates' aspiration to converge towards EU standards of living, could possibly by fulfilled. To address these questions, this paper seeks to assess of the convergence experience of the four less developed EU members, i.e., Spain, Portugal, Ireland, and Greece, after joining the EU, and, to explore what lessons can be learned from that experience. The discussion suggests that, while theoretically possible, there is little empirical reason to fear that European integration would cause economies to diverge. Rather than being spontaneous, however, real convergence would seem to depend crucially, on the capacity of countries to tap international technological spillovers, particularly through foreign direct investment. Macroeconomic stability, effective competition on goods, and factor markets, and, a good human capital endowment are essential to harness benefits. Nonetheless, lingering worries about the possibility that integration would lead to real divergence between countries, or regions of Europe, has led to the creation of large transfers under the EU's Regional Policy. Pending more conclusive evidence of their effectiveness, the candidate countries would seem wise to put greater store by those domestic policies, than by EU grants to fuel their convergence.Publication Export Structure Upgrading and Economic Growth in the Western Balkan Countries(Taylor and Francis, 2019)In this paper, we seek to analyze the impact that the ability to produce more sophisticated goods has on the economic performance of the Western Balkan region and to determine the factors fostering this process. To do so, we elaborate an export sophistication index, à la Hausmann. The outcomes obtained show that export sophistication has a positive and significant effect on growth in these economies. Additionally, we found that this process is driven more by the sophistication in medium-skill and technology-intensive manufactures goods rather than through sophistication in high-skill goods. Our findings also confirm that a greater participation in international production networks and a better institutional environment stimulates the upgrading of exports, and the subsequent economic growth of these economies.Publication Western Balkans Regular Economic Report No. 25, Spring 2024(Washington, DC: World Bank, 2024-04-11)Economic growth in the Western Balkans slowed to 2.6 percent in 2023, from the 3.4 percent reached in 2022, reflecting the impact of a weak European economy weighed down by sequential shocks. Overall, the WB6 region has experienced a rise in total hours worked driven by employment growth and labor force expansion, especially driven by women joining the labor force. Poverty in the Western Balkans returned to its declining trend during 2023, but at a slower pace than pre-pandemic. A robust fiscal performance and solid rate of gross domestic product (GDP) growth led to a fall in debt as a share of GDP. After increasing to levels not seen in several decades, inflation rates in the WB6 fell significantly during 2023. Growth projections for the medium term have increased slightly, reflecting cautious optimism that, having weathered a flurry of shocks over recent years, the Western Balkans is beginning to see a return to trend economic performance. However, while the WB6 region is expected to return on its pre-pandemic trend in 2024, this is insufficient to enable meaningful convergence with European Union (EU) income levels over the medium term. The spotlight in this edition of the Western Balkans Regular Economic Report focuses on the role of cities as engines of growth and leading actor in the green transition. This spotlight recommends action on three main fronts to make cities in the Western Balkans greener. First, it is crucial to reduce urban sprawl and make cities more compact. Second, cities must bring down their emissions, also because this will have immediate improvement on socio-economic and environmental outcomes. And third, cities must take actions to reduce extreme urban heat and enhance preparedness for it.Publication Western Balkans Regular Economic Report No. 27, Spring 2025(Washington, DC: World Bank, 2025-04-29)The Western Balkans Regular Economic Report highlights the significant impact of extreme climate events on labor markets in the region. Rising temperatures, heavy precipitation, and other severe weather events are exacerbating existing vulnerabilities and creating new challenges for both workers and employers. These climate changes, combined with the global shift towards a low-carbon economy, are reshaping employment patterns in key sectors such as energy, agriculture, and tourism. Direct climate impacts, including heat stress, droughts, and floods, are affecting workers, their families, and businesses. Additionally, structural shifts in employment demand and skills requirements are emerging. For instance, areas dependent on tourism in the Western Balkans are increasingly susceptible to extreme weather events, which can lead to a decrease in visitor numbers, disrupt revenue streams, and threaten local jobs. Looking forward, the changing climate and the transition to a greener economy will necessitate significant workforce adaptation. This includes reforms to social protection systems and employment services to better safeguard individuals and facilitate labor market transitions. These measures are essential to protect people and support the evolving demands of the labor market in response to climate change.
Users also downloaded
Showing related downloaded files
Publication Greater Heights(Washington, DC: World Bank, 2025-03-12)Twenty-seven countries have reached high-income status since 1990. Ten of these are in the Europe and Central Asia region and have joined the European Union. Another 20 in the region have become more prosperous since the 1990s. However, their transition to high-income status has been delayed. These middle-income countries have found that the prospects for growth to high-income status have become even more difficult since the 2007–09 global financial crisis. This reflects partly a slowdown in structural reforms at home and partly the challenges associated with a deterioration in the global environment. The concern has emerged that many countries in the region may be caught in the middle-income trap, a phase in development characterized by a recurring deceleration in growth and by per capita incomes that are systematically below the high-income threshold. To ensure that these countries overcome the obstacles to growth and achieve progress toward high-income status, policy makers need to make the transition from a strategy driven largely by investment to a strategy that is supported by the importation and diffusion of global capital, knowledge, and technology and then to a strategy that complements these with innovation. The report Greater Heights: Growing to High Income in Europe and Central Asia relies on the 3i strategy described in World Development Report 2024—investment, infusion, and innovation—to propose policy options to assist middle-income countries in Europe and Central Asia in the effort to reach high-income status. Drawing on comprehensive empirical analysis, the report offers actionable recommendations that will enable policy makers to advance stronger economic growth across the region. Such a transition will require continued and sustained foundational reform to maximize the drivers of economic growth while pivoting to new transformative reforms to promote the development of more complex economic structures and institutions. These involve the need to discipline incumbents, boost the role of the private sector, strengthen the competitive environment, and reward merit. The emphasis on a strategy driven by innovation is also critically important for those countries that have already attained high-income status.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Western Balkans 6 Country Climate and Development Report(Washington, DC: World Bank Group, 2024-07-16)This Regional Western Balkans Countries Climate and Development Report (CCDR) stands out in several ways. In a region that often lacks cohesive regional alliances, this report emphasizes how the challenges faced across countries are often common and interconnected, and, importantly, that climate action requires coordination on multiple fronts. Simultaneously, it illustrates the differences across countries, places, and people that require targeted strategies and interventions. This report demonstrates how shocks and stressors re intensifying and how investments in adaptation could bring significant benefits in the form of avoided losses, accelerated economic potential, and amplified social and economic spillovers. Given the region’s high emission and energy intensity and the limitations of its current fossil fuel-based development model, the report articulates a path to greener and more resilient growth, a path that is more consistent with the aspiration of accession to the EU. The report finds that the net zero transition can be undertaken without compromising the economic potential of the Western Balkans and that it could lead to higher growth than under the Reference Scenario (RS) with appropriate structural reforms.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication World Bank Annual Report 2024(Washington, DC: World Bank, 2024-10-25)This annual report, which covers the period from July 1, 2023, to June 30, 2024, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—collectively known as the World Bank—in accordance with the respective bylaws of the two institutions. Ajay Banga, President of the World Bank Group and Chairman of the Board of Executive Directors, has submitted this report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors.