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Economic growth in the Western Balkans is expected to remain subdued in 2026, weighed down by the impact of the conflict in the Middle East, persistent inflation, and heightened uncertainty. Growth forecasts for 2026 have been revised downward since the Fall 2025 edition of the report from 3.1 percent to 2.8 percent.
On the upside, growth in the Western Balkans could benefit from faster reform implementation, stronger institutional capacity, and greater policy stability, complemented by decisive action to unlock the region’s human capital potential.
The spotlight of this edition of the Western Balkans Regular Economic Report focuses on mobilizing underutilized human capital. Western Balkan populations are among the most rapidly aging in Europe. Within the next decade, at least one in five people in the region will be over 65. This is compounded by outmigration, with working-age people, including college graduates and manual workers, looking for better pay and prospects abroad.
The report points to an underused capital — women, young people, and others who want to work but face barriers. If labor force participation rates across the region matched those in comparable European Union countries, that would add over 2.8 million workers available to reduce the labor shortages.
Realizing the potential of the region’s human capital is vital to mitigate labor constraints, sustain economic growth, and support long‑term fiscal and social sustainability. The path forward includes smarter tax and benefits rules, affordable childcare and elderly care, better job training, and regulation for online platform jobs.
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