The OECD works closely with South East Europe (SEE) to foster competitive, integrated, resilient and sustainable economies, particularly through its dedicated OECD South East Europe Regional Programme. It has been supporting the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia and Serbia) and three countries on the OECD accession track (Bulgaria Croatia and Romania) in advancing structural reforms and converging towards OECD, by conducting evidence-based analysis, facilitating peer learning and promoting OECD standards and tools.
South East Europe
South East Europe and the OECD
Key messages
A favourable business environment helps to drive economic activity, job creation and overall economic development, as businesses thrive in a climate that allows them to operate efficiently and competitively. Top of Form Despite significant progress over the last decade, the business environment across South East Europe, in particular in the Western Balkans, remains challenging. Stringent collateral requirements and a lack of alternative financial sources limit businesses’ access to financing. Unfair competition from the informal sector and state-owned enterprises, along with perceptions of high corruption, hamper the level playing field forhold back businesses. Skills gaps undermine investment and impede growth, limiting the scope for economic progress through knowledge-based sectors. Deficiencies in transport infrastructure, especially in rail, and the quality of transport infrastructure negatively impact businesses, by increasing operating costs and limiting market reach.
Climate change and environmental degradation impact lives and economies in the Western Balkans. Mitigating these challenges, while catalysing green investment and innovation, can open new economic opportunities for a sustainable green transition and enhanced resilience. While the Western Balkans have experienced a greening momentum, underpinned by strong EU support, challenges persist. The region's economies often lag behind EU and OECD counterparts in reducing emissions, amid strong reliance on fossil fuels, untapped renewable energy potential, and limited progress in energy efficiency. Air pollution remains a significant concern, alongside serious issues with water and soil quality. Low resource productivity calls for enhanced efforts on adopting circularity in material use approach and reducing consumption footprints.
Building a transition to digital economies brings many benefits that can transform daily lives and boost economic growth, from improving the delivery of public services to enhancing the productivity of the private sector. Poor quality broadband infrastructure and low digital literacy, however, hampers the ability of citizens and businesses in South East Europe, and in particular the Western Balkans, to fully harness the benefits of digital transformation. Many households, firms and public institutions still lack access to reliable and affordable high-speed internet, and a shortage of digital skills holds back firms’ competitiveness. The rollout of digital government services has been uneven across the region, and services do not always correspond to business or citizens’ needs.
Emigration out of South East Europe has been at a high level for decades. In 2020, about a fifth of the total population born in the Western Balkan region lived abroad, predominantly in a handful of OECD countries. Sustained high emigration, especially of younger people, has exacerbated skills-shortages in the region. At the same time, the large and growing diaspora has provided untapped opportunities for socio-economic development in the Western Balkans. The region still lacks a strategic approach to make the most of the diaspora’s skills and financial resources by encouraging knowledge transfers, formalising remittances and attracting diaspora investments. There is also scope to tackle the challenges that incite people to look for better opportunities abroad.
Context
South East European living standards are converging towards EU levels
South East Europe has undergone a significant transformation in recent decades with the transition to market-based economies. With the impetus provided by EU integration, the region has implemented reforms which have enhanced economic stability and growth and narrowed the gap with EU living standards.
Average GDP per capita across the six Western Balkan economies has risen by 80% from USD 9,725 in 2003 to USD 17,505 in 2022 – a remarkable increase though still only 38% of the EU level. Over the same two decades, the three SEE OECD accession candidate countries – Bulgaria, Croatia, Romania – have demonstrated an even more impressive pace of convergence, increasing their average GDP per capita by 90% to reach 68% of the EU and OECD averages.
Explore the level of economic convergence of the Western Balkans toward the EU and OECD.
Carbon emissions are falling across South East Europe, more slowly in the Western Balkans
Over the past two decades, South East Europe (SEE) as a region has steadily reduced its carbon emissions, albeit at a pace that has varied significantly across different economies. The three SEE OECD accession candidate countries reduced their emissions collectively by 52.8% between 2003 and 2020, a faster rate than the OECD country average of 37.1% and the EU average of 41.6%.
The Western Balkan economies achieved a slower decrease, with average emissions falling by 24.5% over the same period.
* This designation is without prejudice to positions on status and is in line with United Nations Security Council Resolution 1244/1999 and the Advisory Opinion of the International Court of Justice on Kosovo’s declaration of independence.
