Digitalisation is reshaping economies, unlocking new pathways for growth, innovation and competitiveness regionally and globally. This chapter evaluates the Western Balkan economies’ progress in advancing digital transformation, relative to the EU, identifying both advancements and remaining challenges. It explores digital adoption at every level – from individuals' digital skills and online interactions to how businesses and governments are harnessing digital technologies, revealing how these efforts drive the development of a dynamic digital economy.
Economic Convergence Scoreboard for the Western Balkans 2025
Abstract
Despite the growing focus on digital transformation through dedicated policies and support mechanisms, the Western Balkans' progress in this cluster remains modest. With a score slightly over half the EU average, digital transformation ranks as the region’s second highest scoring cluster of the five assessed. Among the economies, Serbia leads as the strongest performer, while Bosnia and Herzegovina has the lowest score. Figure 5.1 presents each economy’s performance alongside the seven key indicators on digital transformation that were used to monitor progress and calculate scores. The average regional performance for each indicator is also shown.
Note: The scores – both overall and for individual indicators – were calculated to reflect each economy’s performance relative to the EU average, which is set at 100. The exact values for each indicator are presented in the graphs within the subsequent analysis section. For more information about the calculation of the scores, as well as the overall methodological approach, please consult the Methodology Annex.
Supported by infrastructure investments, the Western Balkan economies demonstrate growing digital connectivity, with internet usage across the region approaching parity with the EU at over 95% of the EU average. However, this connectivity is not fully leveraged to support digital engagement by the population. Internet use for online purchases and interactions with public authorities remains at roughly half of EU rates, driven by insufficient availability of digital public services, lack of awareness about existing services and security concerns. These challenges are further compounded by citizens’ limited digital skills, which stand at approximately 60% of EU levels, underscoring the need for stronger efforts in digital literacy and upskilling initiatives.
While businesses across the region are beginning to embrace the digital transformation, progress remains uneven. Many have adopted basic technologies such as websites to strengthen their market presence; however, the adoption rates of such technologies in most economies still fall short of EU levels. The uptake of more advanced technologies such as artificial intelligence (AI) has been even slower, partly due to underdeveloped governance frameworks and policy instruments.
Meanwhile, the information and communication technology (ICT) sector has emerged as a key driver of economic growth across the Western Balkans, with ICT-sector exports reaching nearly 90% of EU levels. Several factors have contributed to this trend, including 1) tailored policies to attract investment; 2) expanded infrastructure for start-ups; and 3) a skilled youth workforce benefitting from competitive wages due to foreign firms outsourcing to the Western Balkans.
Digital transformation is reshaping economies and societies, affecting citizens, businesses and governments alike. Its fast-paced, cross-sectoral nature presents a key opportunity for the Western Balkans. As the digital transformation becomes central to initiatives such as the EU’s new Growth Plan for the Western Balkans,1 accelerating adoption and effectively harnessing its potential are crucial to unlocking long-term benefits across the region.
Strong digital skills are a prerequisite for maximising the benefits of digital transformation. However, across the Western Balkans, most economies exhibit low proficiency levels, with only 33.8% of the population possessing at least basic digital skills2 (Figure 5.2). Montenegro stands out as the regional frontrunner, with 49.6% of its population having basic or above-basic skills – just five percentage points below the EU average of 54.7%. In contrast, Kosovo and Albania show the lowest proficiency levels, with only 25.4% and 23.3% of their populations, respectively, meeting this threshold – less than half the EU level.
Percentage (of 16-74 year-olds)
Notes: Data for this indicator were collected only in 2021 and 2023, meaning the economy and regional averages for the 2020-23 period are based solely on these two years. Data are unavailable for Kosovo and North Macedonia in 2023.
Sources: (Eurostat, 2024[1]). Additional data for Kosovo sent to the OECD from KAS. Additional data for North Macedonia sent to the OECD from MAKSTAT.
The digital skills gap in the Western Balkans primarily affects older people. Among younger individuals (16-24 year-olds), around 65% possess basic or above-basic skills – only six percentage points below the EU average – with certain economies, such as Bosnia and Herzegovina and Montenegro, surpassing EU levels. Increased focus on integrating digital literacy and skills into school curricula,3 combined with enhanced and more affordable access to technology, have proved effective in narrowing the skills gap among younger cohorts. Conversely, among older age groups (55-64 and 65-74 year-olds), the gap with the EU average widens to more than 20 percentage points.4 The digital exclusion limits older populations’ competitiveness in the labour market and their access to essential public services, ranging from healthcare to social benefits.
Efforts to address digital skills gaps have been uneven and often slow (see the Skills chapter for more details). National digital sector strategies in economies such as Albania, Montenegro, North Macedonia and Serbia include provisions for digital literacy and upskilling among disadvantaged groups (including women, older individuals and long-term unemployed), but progress is limited. For example, Montenegro’s Digital Academy has yet to provide training for individuals from disadvantaged backgrounds, and in Serbia, subsidies to help these populations purchase computers and access training are still pending (OECD, 2024[2]).
Training provided by employers also remains insufficient. On average, 52% of businesses in the Western Balkans reported efforts to enhance employees’ digital skills through on-the-job or internal training. However, in economies like North Macedonia and Montenegro, more than 60% of surveyed employers5 indicated that they offered no digital skills training (RCC, 2023[3]). This lack of employer-led initiatives forces individuals to seek out their own upskilling opportunities, which continue to be limited across much of the region.
Despite challenges in strengthening digital skills among the population, internet use by individuals has achieved significant convergence with the EU average across the Western Balkans.6 Between 2020 and 2023, the average usage rate in the region reached 84.1%, equivalent to over 95% of the EU rate (Figure 5.3). Kosovo stood out as the regional leader, surpassing the EU average with a usage rate of 96.8%.
Percentage of total population
Sources: (World Bank, 2024[4]). Data for Kosovo from (Eurostat, 2024[5]).
This near convergence can be attributed to significant advancements in digital infrastructure, driven by economy-specific and regional initiatives. Most Western Balkan economies have either adopted national broadband strategies or incorporated broadband targets into broader policies, with four of the six7 updating their broadband development plans to ensure high-capacity connectivity exceeding 100 megabits per second (OECD, 2024[2]).
Recent data suggest that further expanding internet access is now predominantly a rural challenge. Fixed internet penetration in the region reveals substantial rural-urban disparities, with gaps ranging from 14 percentage points in Montenegro to 25 in Albania,8 pointing to ongoing issues with access and affordability of internet in rural areas. To address these challenges and support the development of digital infrastructure, increased financial resources have been made available through the Western Balkans Investment Framework.9 Since 2008, nearly EUR 53 million in grants has been allocated to projects aimed at improving high-speed internet connectivity (see the Infrastructure and Connectivity chapter for more details).
In the Western Balkans, the rate of internet use for interacting with public authorities remains far below the EU, with the regional average of 29.8% representing just over half the EU average (57.9%) (Figure 5.4). As the region’s frontrunners, Serbia and Albania both have rates approaching 40%; conversely, Bosnia and Herzegovina trails behind its peers with a usage rate of 17.3% – only 30% of EU levels.
Percentage (of 16-74 year-olds)
Note: Data are unavailable for Bosnia and Herzegovina (2022, 2023), Kosovo (2021, 2022, 2023), North Macedonia (2022, 2023) and the EU (2022, 2023).
Source: (Eurostat, 2024[6]). Additional data for Serbia sent to the OECD from SORS.
Low rates of e-government usage can primarily be attributed to the limited availability of high-quality and transactional services. For instance, in Kosovo, only 10% of public services are digitalised, whereas in Bosnia and Herzegovina, there is no national e-service portal (OECD, 2024[2]).10 Across the region, most digital public services offered are informational. In contrast, digital transactional services – which enable citizens to submit applications, pay taxes, renew licenses or obtain official documents remotely without visiting a government office – remain scarce in most economies, with North Macedonia providing only 24% of such services digitally and Montenegro 30%.11
Even in the economies with more developed e-government services, usage still falls below EU levels, suggesting that these low rates are not solely a result of limited availability. For instance, Albania offers more than 1 230 fully transactional online services for citizens, businesses and public administration – the highest number in the region – and in Serbia, 80% of the approximately 400 e‑government services are transactional.
Engagement is hindered by low levels of awareness, with one-third of the region’s population unaware of the available e-services (Đinđić, Mitrović and Škorić, 2023[7]). Although national strategies and external assessments emphasise the importance of increasing public awareness of e-government services,12 outreach campaigns remain inadequate. Moreover, even among those who are aware of these services, satisfaction is generally low or declining in most economies,13 suggesting usability and quality challenges.14
Another factor contributing to the low engagement with e-government services is the previously discussed issue of low digital skills, with 42% of individuals reporting that they prefer physical documents because they lack the skills necessary to use online services (RCC, 2023[8]). Most Western Balkan economies have not prioritised the establishment of local centres to help citizens use e-services. Where such centres exist, they are often limited and concentrated in urban areas: for instance, North Macedonia only has single point of service centres in five cities (OECD, 2024[2]). The notable exception is Serbia, which launched “e‑counters” in more than 100 cities and municipalities to assist citizens in registering for and using online government services (NALED, 2021[9]).
The prevalence of online purchases provides clues about the depth of digital technologies’ penetration into society, encompassing infrastructure, skills and trust. In the Western Balkans, internet usage for online purchases remains relatively low, with an average of 36.6% of citizens (slightly above half of the EU average) indicating that they made online purchases in the past year (Figure 5.5). While more than 45% of citizens in Kosovo and Serbia make online purchases, only 26.4% of citizens in Montenegro and 23.6% in Albania reported using the internet for this purpose.
Percentage (of 16-74 year-olds)
Note: Data are unavailable for Bosnia and Herzegovina (2022), Kosovo (2022, 2023) and North Macedonia (2022, 2023).
Sources: (Eurostat, 2024[10]). Additional data for Albania sent to the OECD from INSTAT. Additional data for Kosovo sent to the OECD from KAS.
A key barrier to higher rates of internet use for purchases in the Western Balkans, apart from the aforementioned challenges related to digital skills, is a lack of trust in the security of online transactions, with around 30% of citizens expressing concern about the safety of online payments (RCC, 2023[8]). The recent surge in cyberattacks, targeting both the public sector and individuals, has led to the leakage of sensitive information such as passwords, credit card numbers and income details, prompting consumers to be more cautious about sharing financial information online (Ispanovic et al., 2023[11]). Since 2022, approximately 1.2 million personal records have been compromised in data breaches across the region (Atlantic Council, 2024[12]). Notably, cyberattacks in Montenegro and Albania in 2022 disrupted government systems, with Albania facing temporary outages and Montenegro enduring ongoing challenges to online public services.
Concerns about cybersecurity are further compounded by gaps in data protection and consumer rights frameworks. Only Serbia and Kosovo have updated their personal data protection laws to align with the EU’s General Data Protection Regulation (GDPR) standards, with the other economies having no similar safeguards to help consumers dispute unauthorised transactions or recover lost funds (OECD, 2024[2]). While some economies have recently modernised consumer protection rules to address digital trade, inspections and law enforcement in businesses conducting e-commerce remain weak. Additionally, the Western Balkan economies lack sufficient resources for public awareness campaigns on consumer rights in e-commerce as well as effective mechanisms to support consumers in effectively exercising these rights.
Low usage of debit and credit cards for payments in the region is another contributor to low online purchases. In fact, debit and credit card ownership across the Western Balkans is significantly below that of the EU, with debit card ownership roughly half of the EU average and credit card ownership at just 33% of EU levels.15 While low trust in data security and heightened awareness about cyber risks likely play a role, these factors are further compounded by the large informal economy and relatively low levels of digital literacy.
The low rates of internet use for purchases can also be attributed in part to the relatively low proportion of businesses with websites in some Western Balkan economies. While 62.5% of businesses in the region have websites – about 80% of the EU average – this figure is largely driven by Montenegro and Serbia, where adoption rates exceed EU levels (Figure 5.6). In contrast, other economies lag behind, with Kosovo having the lowest rate at just 40.0%, slightly over half the EU average.
Percentage of enterprises with 10+ employees
Note: Data are unavailable for Albania (2020), Bosnia and Herzegovina (2022), Kosovo (2020, 2021, 2023), North Macedonia (2022, 2023), Serbia (2022) and the EU (2022).
Sources: (Eurostat, 2024[13]). Additional data from (INSTAT, 2024[14]) for Albania, (KAS, 2023[15]) for Kosovo, (MAKSTAT, 2024[16]) for North Macedonia and (MONSTAT, 2024[17]) for Montenegro.
Businesses in the Western Balkans may view having a website as unnecessary due to the limited digital engagement of potential customers. When customers are either unable or unwilling to interact with businesses online, the perceived value of establishing a web presence diminishes. This is especially true given the higher costs associated with developing and maintaining a website, compared to free, ready-made social media platforms such as Facebook or Instagram. Indeed, while website adoption remains low, small and medium-sized enterprises (SMEs) in the region have a strong social media presence, with usage levels comparable to the EU average (OECD, 2024[2]). Additionally, some businesses prefer traditional marketing methods, a tendency particularly evident among start-ups, most of which consider word-of-mouth marketing crucial to their operations (Darova, 2023[18]).
While several initiatives have been introduced across the region to promote e-commerce adoption by businesses, their impact, particularly on SMEs, has been constrained by inadequate public support. Economies such as Albania, Kosovo and North Macedonia have a strong policy framework for supporting e-commerce development but have yet to allocate the concrete resources necessary for implementing corresponding activities. In other economies, there are also signs indicating a gap between the available funds and demand. For instance, in Serbia, only 60% of businesses that applied for funding through the Digital Transformation Support Programme for SMEs were successful (OECD, 2024[2]). Public efforts in most Western Balkan economies are largely driven by EU funding. While donor funding is beneficial in ensuring programme availability, this reliance raises concerns regarding the long-term sustainability of these initiatives and their ad hoc nature.
While developing a website is often the first step for businesses in embracing digital tools and expanding their reach, adopting the latest emerging technologies marks a shift towards transforming operations, creating opportunities for growth and competitive advantage. In the Western Balkans, the share of businesses using AI technologies averaged 5.4% between 2020 and 23 – around 70% of EU levels (which reported an average of nearly 8% of businesses) (Figure 5.7). Of note, both Albania and North Macedonia perform exceptionally well in this indicator, with Albania reaching and North Macedonia surpassing the EU average. In contrast, whereas Serbia had been a top performer in most of the other assessed indicators in this cluster, it is the weakest performer in the region in terms of AI technologies.
Percentage of all enterprises
Note: Data are unavailable for Albania (2020, 2022), Bosnia and Herzegovina (2020, 2022), Kosovo (2020, 2021, 2023), Montenegro (2020, 2022), North Macedonia (2021, 2022, 2023), Serbia (2020, 2022) and the EU (2020, 2022).
Sources: (Eurostat, 2024[19]). Additional data for Albania sent to the OECD from INSTAT. Additional data for Kosovo and North Macedonia from (RCC, 2022[20]).
Support for the development and adoption of AI in the private sector is gaining traction across the Western Balkans. Innovation funds in Montenegro, North Macedonia and Serbia are providing financial support, such as subsidies and vouchers, alongside non-financial assistance such as mentoring to help businesses integrate and advance AI technologies (OECD, 2024[2]). Serbia has progressed further with the establishment of its Research and Development Institute for Artificial Intelligence, which fosters public-private collaboration, supports AI startups and raises awareness of AI's potential applications. However, in the economies without such institutions, weaker innovation ecosystems, combined with limited resources and infrastructure, can hinder businesses – particularly start-ups and small enterprises – from gaining the capacity to adopt AI effectively.
Underdeveloped governance and ethical frameworks for AI also discourage businesses from adopting these technologies. Key regulatory gaps in areas such as data privacy, liability, compliance and transparency create uncertainty regarding the boundaries of enterprises’ acceptable use of AI. So far, only North Macedonia and Serbia have introduced ethical guidelines for the use of AI technologies (OECD, 2024[2]). Moreover, while all economies in the region incorporate AI into their broader digital development strategies, Serbia is the only one to have adopted a dedicated national AI strategy, with Albania and North Macedonia still in the initial stages of formulating their own strategic frameworks.
While the adoption of digital technologies continues to be largely limited, the region’s strong ICT sector highlights its potential to compete in the global digital economy. Across the Western Balkans, the ICT sector employs approximately 150 000 individuals (or 1.5% of the workforce)16 and accounts for around 2% of GDP (RCC, 2024[21]). Moreover, the sector's export performance is notable, with ICT services exports averaging 2.3% of GDP between 2020 and 2023 – nearly 90% of the EU average – and totalling USD 13.9 billion (Figure 5.8). For regional frontrunners, Serbia and North Macedonia, this rate exceeds the EU average, reaching 4.0% and 3.2% of GDP, respectively. In contrast, Albania lags far behind, recording exports equivalent to only 0.7% of GDP – the lowest in the region.
Percentage of GDP
Sources: OECD calculations based on (World Bank, 2024[22]) and (World Bank, 2024[23]).
To attract investment and support the growth of its ICT sector, the region offers a range of targeted incentives. For instance, in Albania, the corporate income tax rate for software development companies was reduced from 15% to 5% in 2018. In Serbia, companies that meet the eligibility criteria17 and apply for the IP Box regime can exclude up to 80% of income derived from intellectual property from their taxable base, effectively reducing the corporate income tax rate from the standard 15% to 3%. This incentive is particularly attractive for the ICT sector, which generates much of its income from intangible assets like software and digital solutions. In Kosovo, customs duties on ICT equipment have been fully eliminated since 2014.18
These incentives are complemented by ongoing investment and expansion of innovation infrastructure, which remains heavily concentrated in the ICT sector. This includes the development of digital innovation hubs, science and technology parks, accelerators and start-up centres (OECD, 2024[2]). A notable example is the Science and Technology Park Belgrade, which, since its establishment in 2015, has assisted more than 240 innovative tech companies by providing office space, research facilities, and access to networking and mentoring resources (STP Belgrade, 2024[24]).
Finally, the region's skilled youth with strong English proficiency and competitive wages have made it an attractive destination for foreign companies to outsource and relocate ICT services. This outsourcing of European companies has led to the emergence of early-stage ICT “clusters” in economies such as Serbia (in Vojvodina) and Albania (Tirana) (Kacani and Shaqiri, 2023[25]). Nevertheless, rising labour costs may weaken the region’s ability to maintain this competitive position in the ICT sector. In fact, the wage gap between the Western Balkans and the EU is narrowing: while the region’s average wages in the ICT sector grew by 5-10% annually from 2012 to 2020, increases in the EU averaged below 1%, reducing the relative affordability of ICT talent in the region (EBRD, 2024[26]).
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← 1. The Growth Plan for the Western Balkans was adopted by the European Commission in November 2023. It has four primary objectives: 1) better integrating the Western Balkan partners into the EU’s Single Market; 2) advancing regional economic co-operation; 3) deepening EU-related reforms; and 4) increasing pre-accession funding in view of accelerating socio-economic convergence of the Western Balkans to the EU. For more, see: https://enlargement.ec.europa.eu/enlargement-policy/growth-plan-western-balkans_en.
← 2. "Basic" digital skills refer to individuals who demonstrate at least a basic level (i.e. completion of at least one activity) in each of the five assessed areas: information and data literacy, communication and collaboration, digital content creation, safety, and problem solving. To be classified as having "above-basic" digital skills, an individual must achieve an above-basic level in all five areas, typically by completing multiple activities. For detailed methodology, see the indicator’s metadata at (Eurostat, 2024[1]).
← 3. The education sector across the Western Balkans places growing emphasis on digital skills, although approaches and frameworks differ between economies. Many economies have developed comprehensive strategies to prioritise digital competencies, incorporating ICT and digital skills into primary and secondary school curricula. In most instances, ICT-related courses are compulsory for students, covering subjects such as computer science in Serbia, coding in Albania, and informatics in Montenegro and North Macedonia. For more information, see (OECD, 2024[2]).
← 4. Only 15.4% of 55-64 year-olds and 5.5% of 65-74 year-olds in the Western Balkans possess basic or above-basic digital skills, compared to 42.0% and 25.5% in the EU, respectively. To access this data, see (Eurostat, 2024[38]).
← 5. These rates were as follows: 70% of respondents in North Macedonia and 63% in Montenegro.
← 6. It is important to recognise that high levels of internet usage do not always translate into greater economic benefits or improved societal outcomes. In some instances, the effects can even be harmful, particularly when individuals use the internet to consume misinformation or disinformation. Lacking the digital literacy necessary to assess online content critically and detect misleading or false information – an issue exacerbated by the rise of generative AI – can undermine individual decision making as well as political stability and economic performance.
← 7. Albania, Kosovo, North Macedonia and Serbia.
← 8. Data on the rural-urban divide were only available for Albania, Montenegro and Serbia. In Albania, fixed internet penetration reached 34% in urban areas and only 9% in rural areas. For more, see (Monitor, 2024[27]). In Serbia, 85% of households in urban areas were connected to fixed broadband compared to 69% in rural areas (FAO, 2021[28]). Finally, in Montenegro, internet access from home ranged from 71.6% of rural households to 85.6% of urban households (MONSTAT, 2022[36]).
← 9. As of December 2024, the Western Balkans Investment Framework (WBIF) has 12 projects supporting digital infrastructure in the Western Balkans, with an investment value of nearly EUR 580 million. The grant value of these projects is EUR 53 million, while the loan value exceeds EUR 122 million. For more information, see: www.wbif.eu/sectors/digital-infrastructure.
← 10. Although Bosnia and Herzegovina does not have a national e-service portal, several e-services are provided through the Agency for Identification Documents, Registers, and Data Exchange (IDDEEA).
← 11. The estimate for Montenegro comes from data published a report by the Balkan Investigative Reporting Network, which states that while Montenegro offers around 500 e-government services, 349 of them are instructions on how to use these services (Maksić and Uzelac, n.d.[29]).
← 12. For example, Montenegro’s Digital Transformation Strategy 2022-26 contains an objective to raise the awareness of citizens and the economy about the importance of digital development through a co‑ordinated communication campaign at both the state and local level (Government of Montenegro, 2021[30]). Kosovo’s e-Government Strategy 2023-27 contains a measure focused on awareness raising to address the strategic objective of ensuring public digital services are user-centric and actively used. The strategy can be found here (Government of Kosovo, 2023[31]). Additionally, the United Nations Development Programme (UNDP) conducted a digital readiness assessment of North Macedonia in 2023 that identified limited public awareness as one of the key challenges to digital transformation, particularly in terms of digital governance (UNDP, 2023[32]).
← 13. SIGMA-OECD monitoring reports based on the Methodological Framework for the Principles of Public Administration, see (SIGMA/OECD, 2025[37]).
← 14. Even in economies where transactional services are available, their usability may be limited in specific cases or exemptions. For instance, while renewing a driver’s license might be possible online, individuals who wear glasses or contact lenses may need to submit a doctor’s prescription, which can only be validated in person at a police station.
← 15. Credit card ownership was calculated to be 14.8%, while debit card ownership was calculated to be 46.1%. For both averages, data for Albania, Bosnia and Herzegovina, North Macedonia and Serbia came from 2021 (Statista, 2025[33]; 2025[34]). Data points for both Montenegro and Kosovo were from 2020 (World Bank, 2020[35]). The reasons for low debit and credit card ownership in the Western Balkans are multi-faceted, and the explanation for this phenomenon requires further analyses that extends beyond the scope of this report. The cash-dominant nature of the region’s economies – which stems from sundry factors, including the prevalent informal economy, distrust, inaccessibility or lack of inclusivity of digital options, or “store of value” purposes – can make online purchases less accessible and practical for many consumers. For more, see (World Bank, 2020[35]).
← 16. The RCC source reports that the ICT sector accounts for 150 000 employees, equivalent to 3% of the “registered workforce”. However, this denominator significantly underestimates the actual size of the labour force. To provide a more representative figure, the employment share was recalculated using the region’s estimated total workforce. Based on an average population of approximately 17 million in 2020-23 and an average employment rate of 57.6% over the same period, the total workforce is estimated at 9.8 million. This yields an ICT employment share of roughly 1.53% (150 000/9.8 million).
← 17. Companies must hold copyright or related rights and that generate revenue based on this copyright.
← 18. This information was provided through the qualitative questionnaires completed by government officials as part of the Western Balkans Competitiveness Outlook 2024 assessment process.