As elsewhere in the world, the COVID-19 pandemic has plunged countries in the Western Balkans into a deep recession. While the outlook remains uncertain, economic activity in the region is projected to contract by 4.8 percent in 2020.
The primary causes are the drop in both domestic and foreign demand, and disruptions in supply chains due to imposed containment measures, such as lockdowns. A second wave of the pandemic in the Western Balkans since mid-June and political uncertainty about elections in some countries have further impeded economic recovery.
The recession has worsened labor market conditions and interrupted welfare improvements, although government response measures cushioned the blow. Prior to the pandemic outbreak, most of the countries in the Western Balkans had made progress in reducing poverty and boosting household incomes. The crisis interrupted, and in some cases reversed, this process. By June, the unemployment rate in the region rose by 0.5 pp, and 139,000 jobs were lost. Government measures contained the labor market fallout and helped prevent larger spikes in poverty. In Albania, Kosovo, Montenegro, and Serbia, the COVID-19 crisis is estimated to have pushed over 300,000 people into poverty—a significant number, but less than half of what it would have been without the response measures.