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BRIEFOctober 12, 2023

Western Balkans: Regional Economic Integration

Economic integration is a key driver of growth, job creation, and prosperity. This is especially true for smaller economies like those in the Western Balkans—Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia. The region’s proximity to a market of 450 million people in the European Union creates a massive opportunity, which can only be realized if barriers to trade in goods and services are addressed, thereby allowing the potential of the region’s entrepreneurs, investors, and firms to be fully unleashed.

Experience across the world has shown that for firms to grow and achieve economies of scale, it is essential to access international markets. Economic integration provides a fast track to the adoption of new technologies, to the flow of new ideas and innovations, and to the shift to higher productivity that underpins growth in middle-income economies.
Antonella Bassani
World Bank Vice President for Europe and Central Asia

The World Bank is working with each of the Western Balkan economies through policy advice and lending programs in several areas: trade, infrastructure, transboundary water management, digital economy, and mobility of people. Among the priorities currently discussed by the Western Balkan leaders, including through Berlin Process, are reforms aiming at improving connectivity among the Western Balkans and with the EU, and actions to modernize payment systems.

According to a new World Bank research, addressing barriers to regional economic integration in these two critical areas would provide tangible benefits for the Western Balkans in the next few years:

  • Trade and transport facilitation. Reducing average wait times at the border by three hours—which is the difference between average wait times in the Western Balkans and in the OECD—could add as much as three percent to the gross domestic product in each of the six Western Balkan economies over the medium term. The impacts of trade reforms and improvements in road infrastructure would be amplified if Western Balkan economies belonged to the European Union, which would result in an additional six percent boost to welfare.
  • Payment systems. Every year, some EUR 12 billion in remittances flow into the Western Balkans. If the target set out by the Sustainable Development Goals of reducing remittance costs to three percent were to be achieved, doing so would provide savings of as much as EUR 500 million every year.

As part of the Trade and Transport Facilitation Project the World Bank invests in the development of national single windows for trade, helps resolve connectivity bottlenecks along transport corridors, and provides support to regulatory reforms.

The Payment Modernization Project supports payment modernization efforts within the region by providing technical assistance. Adopting EU payment regulations and other requirements to achieve the Single Euro Payments Area (SEPA) readiness and modernizing payment infrastructures are among the key activities to assist authorities in boosting social inclusion.

Through these and other programs, the World Bank, in close collaboration with governments of the Western Balkans and partners, is working to achieve sustainable economic growth that reduces poverty and boosts regional prosperity.