Western Balkans growth outlook strengthens as World Bank flags trade reform gains

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Western Balkans growth outlook

Highlights

World Bank projects Western Balkans GDP growth to rise from 2.6 percent in 2025 to 3.4 percent in 2027 and 2028.
Trade in goods and services will reach 107 percent of regional GDP in 2025, with services exports growing fourfold since 2010.
World Bank simulations show halving non-tariff barriers could boost regional GDP by up to 12.5 percent over the medium term.

Growth forecasts and reform priorities

As reported by the World Bank, average growth across Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia is projected to reach 3.1 percent in 2026, up from 2.6 percent in 2025. The report says growth is expected to rise to 3.4 percent in 2027 and remain at that level in 2028.

The institution says the regional economy continues to show resilience despite heightened geopolitical uncertainty and weak growth among key trading partners. It adds that resilience alone is not enough to close the income gap with the European Union or generate higher-quality employment, arguing that the next phase of growth depends on efficient, predictable regulation and the removal of trade barriers.

Trade in goods and services reaches 107 percent of regional GDP in 2025, above the EU average of 90 percent, while services exports grow fourfold between 2010 and 2025. The report says the next wave of reforms should help companies make fuller and more durable use of market access by cutting unnecessary costs that arise behind the border.

Trade costs and employment impact

Average tariffs on goods imported into the Western Balkans are about 6 percent, but non-tariff measures add roughly another 10 percent to import costs, according to the report. In some agri-food sectors those added costs exceed 20 percent, while restrictions on cross-border services are estimated at 29 percent.

The report's simulations show that removing half of the remaining barriers to imports, including licensing and authorization requirements, repeated inspections, certification procedures, and local-presence rules, could raise GDP by up to 12.5 percent over the medium term. It says higher import costs also make it harder for regional companies to export and remain in foreign markets.

Only about one third of new export ventures by Western Balkans firms survive their first year, and just 1 to 4 percent reach a fifth year. That matters for employment because trading firms account for the vast majority of manufacturing jobs in the region, and they are generally larger and pay better than comparable companies focused only on domestic markets.

The report says reform efforts should focus on better regulation rather than simply less regulation. It points to streamlined and digitized procedures, risk-based inspections, recognition of aligned standards and qualifications, and safeguards that still protect legitimate public objectives.

Our earlier article on WTO warnings about lasting trade impacts from the wars in Ukraine and the Middle East explained how repeated disruptions are pushing firms to redesign supply chains and shipping routes for resilience, even at higher cost. It also noted that regional trade could deepen as countries look for growth closer to home, while the global trade outlook remains exposed to tariffs and ongoing geopolitical risks.

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