For 25 years, the OECD has worked 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 EU countries on the OECD accession track (Bulgaria, Croatia and Romania) in advancing structural reforms and converging towards the 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
Economic convergence with the European Union remains a strategic necessity for the six Western Balkan economies. Beyond improving living standards, a more competitive and resilient Western Balkans is essential for fostering trade, attracting investment and deepening integration into European markets. Despite progress made over the past two decades in sustaining economic growth, the Western Balkan economies have made only modest headway in narrowing the gap with their EU counterparts. For instance, the region’s GDP per capita at PPP is just below two-fifths (40%) of the EU average in 2023.
To address these issues, the OECD supports the South East Europe region in monitoring the economic convergence and implementation of reforms through the following workstreams:
A favourable business environment helps to drive economic activity, create jobs and strengthen economic development. Despite significant progress over the last decade, the business environment across South East Europe, in particular in the Western Balkans, remains challenging. Unfair competition from the informal sector and state-owned enterprises, along with perceptions of high corruption, hamper the level playing field or hold back businesses. Skills gaps, excarbated by high levels of emigration, undermine investment and impede growth, limiting the scope for economic progress through knowledge-based sectors. In addition, cumbersome administrative procedures, regulatory uncertainty and weak enforcement of contracts increase operational costs and discourage entrepreneurship. Insufficient infrastructure and digital connectivity continue to constrain firms’ productivity and regional integration.
To address these issues, the OECD supports the South East Europe region through the following workstreams:
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. Limited connectivity and obsolete energy infrastructure further slow down the green transition. Low resource productivity calls for enhanced efforts on adopting circularity in material use approach and reducing consumption footprints. Moreover, limited innovation capacity, slow adoption of green and digital technologies and persistent energy inefficiencies further reduce competitiveness and the ability of firms to adapt to global market shifts.
To address these challenges, the OECD supports the South East Europe region through the following workstreams:
The transition to a digital economy brings many benefits that can transform daily lives and boost economic growth, including improving the delivery of public services and enhancing the productivity of the private sector. Poor quality broadband infrastructure and low digital literacy, however, hamper the ability of citizens and businesses in South East Europe, and in particular the Western Balkans, to fully harness the benefits of the digital transformation. Many households, firms and public institutions still lack access to reliable and affordable high-speed internet, and a shortage of digital skills is holding 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.
To address these challenges, the OECD supports the South East Europe region through the following workstreams:
Context
Western Balkans living standards are converging towards EU levels
The Western Balkans have made some progress in narrowing the GDP gap with the European Union, yet the pace of it remains slow. In 2023, the region’s GDP per capita, adjusted for PPP, stood at 39% of the EU average, compared to 25% in 2003. Private consumption has been the main driver of economic growth, fuelled by rising wages and remittances. This highlights the need to revisit the region’s economic models to accelerate economic growth in an inclusive and sustainable manner.
Despite robust FDI inflows, the Western Balkans still face infrastructure and skills challenges that hinder the region’s economic potential
The business environment remains the region’s strongest area, supported by robust FDI inflows and solid levels of private investment. However, informal employment levels in the Western Balkans stand at 20% of total employment as compared to 3% in the EU, distorting competition and resulting in lower government revenues.
Furthermore, despite improvements in digital and energy infrastructure, underdeveloped transport networks continue to hinder convergence in infrastructure and connectivity. On average, 722 million tons of goods were transported per kilometer of railway, representing only 4% of the EU average.
The OECD continues to support the South East Europe region, and in particular the six Western Balkan economies, accelerate targeted policy reforms to accelerate their transition to a greener, better connected and more sustainable region, and unleash their economic potential.
Related publications
* 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.