World Bank forecasts subdued Western Balkans growth at 2.8% in 2026 and says higher workforce participation is essential

The World Bank has published its latest Western Balkans Regular Economic Report, forecasting combined growth across Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia at 2.8% in 2026, which is 0.3 percentage points below previous projections, before a modest rise to 3.2% in 2027. The report attributes the weaker outlook to the ripple effects of the conflict in the Middle East, persistent inflation, and heightened uncertainty, and argues that expanding workforce participation will be critical to sustain reform momentum as labor shortages intensify. The report says the region is aging rapidly, with at least one in five people expected to be over 65 within the next decade, while working-age people continue to leave for better pay and prospects abroad. It identifies women, young people, and others facing barriers to work as an underused source of labor, estimating that matching labor force participation rates seen in comparable European Union countries would add more than 2.8 million workers, while higher female employment alone could raise annual growth by about 0.35 percentage points. Recommended measures include revising tax and benefit rules that make employment financially risky, especially where any reported labor income leads to the loss of poverty-targeted benefits, alongside expanding affordable childcare and eldercare, improving job training, and promoting more flexible and decent working conditions, including for online platform workers.