Economic Convergence Scoreboard for the Western Balkans 2026

Executive summary

Economic convergence with the EU remains a strategic necessity for the six Western Balkan economies. It is central to strengthening competitiveness and resilience, and fostering greater trade, investment and integration into the EU market, as well as raising living standards.

Over the past two decades, the region has made significant progress in sustaining economic growth. Between 2003 and 2025, real GDP per capita expressed in PPP in the Western Balkan economies more than doubled, rising from USD 10 710 to USD 23 660.

Despite this positive convergence trend, the Western Balkan economies have made modest headway in narrowing the gap with their EU counterparts. In 2025, the region’s average GDP per capita reached 42.9% of the EU average – an improvement of 15.5 percentage points since 2003, when it stood at 27.4%. While this represents tangible progress over two decades, the gap highlights the challenges that continue to hinder faster convergence and underscores the need for effective and sustained reform efforts.

This report seeks to shed light on the factors preventing faster economic convergence of the Western Balkan economies and identify the policy areas that require greater attention to accelerate progress. The Economic Convergence Scoreboard for the Western Balkans 2026 offers a comparative overview of the region’s performance in relation to the EU, analysing 43 indicators grouped into six policy clusters: 1) infrastructure and connectivity; 2) skills; 3) business environment; 4) digital transformation; 5) greening, and 6) macro-financial stability. The 2026 edition builds on the Scoreboards published in 2023 and 2025, with a refined methodology and expanded data coverage.

Key findings

Macro-financial Stability

Macro-financial stability is the region’s second-strongest area of performance, demonstrating steady convergence over the past decade.

 

The Western Balkan economies are characterised by robust monetary stability, reflecting low inflation and stable exchange rates. Inflation has been largely aligned with EU rates over the last decade. The region also maintains stable exchange rates vis-à-vis the euro, supported by monetary arrangements ranging from unilateral euroisation and currency boards to managed floating regimes.

Fiscal stability has strengthened, driven by narrower government deficits than in the EU. Government budget balances do not exceed 3% of GDP in most Western Balkan economies, driven by strong tax revenue growth and continued improvements in tax compliance. Nevertheless, long-term government bond interest rates remain above the EU average, suggesting investors still perceive the region as carrying higher sovereign risk than EU member states.

External positions remain characterised by sizeable current account deficits across the region, reflecting continued reliance on external financing. Persistent merchandise trade deficits remain the main source of external imbalances, only partly offset by growing surpluses in services exports, driven by tourism and ICT services. Meanwhile, declining remittances and rising outward investment income payments add further pressure on the current account balance.

Infrastructure and Connectivity

Infrastructure and Connectivity is the second-fastest-converging cluster, though a gap with the EU persists.

 

Transport networkscontinue to lag behind those of the EU, increasing costs for businesses and reducing trade efficiency.. Rail continues to lose ground to road: in 2023, only 15% of the overall investment earmarked for the maintenance of the Trans-European Transport Network has been realised, and the region's use of rail for freight has declined over the past decade, with freight intensity now standing at just 34% of the EU average. While the Western Balkans Investment Framework has financed over 1 000 km of road upgrades since 2009, a comparable push on rail has yet to materialise, and regulatory delays continue to slow the projects that do move forward.

Energy infrastructure remains constrained by ageing coal-based power plants, which contribute to inefficiencies reflected in power losses more than twice the EU average. Even then, fossil fuel subsidies continue to keep electricity costs relatively low across much of the region. Nonetheless, partially driven by the prospect of EU accession, electricity market liberalisation efforts have intensified across the region, which could support more efficient and sustainable energy markets over the longer term.

Digital infrastructure has benefited from substantial investments, significantly improving digital connectivity, with 4G penetration rates reaching EU levels. Nonetheless, gaps remain in high-speed network development: the region's average broadband speed is around 60% of the EU average, with development constrained, among other factors, by ongoing disparities in connectivity between urban and rural areas.

Skills

The Skills cluster records both the lowest score in the region and the slowest convergence.

 

Labour market conditions in the region continue to improve, with progress in raising workforce educational attainment and employment rates. In particular, the region's share of the labour force with advanced education matches the EU average. At the same time, employment outcomes have also improved, though part of this trend also reflects high emigration, which has reduced the working-age population. Nonetheless, further progress remains constrained by the gender gap in the labour force, which stands at more than twice the EU average.

Education systems fall short in equipping youth with the foundational skills ensuring a smooth school-to-work transition. Programme for International Student Assessment (PISA) performance is around 20% below the EU average, constrained by insufficient public education spending and low enrolment in early childhood education and care. Weak links between education providers and industry further limit the labour-market relevance of vocational education and training (VET), contributing to a youth not in employment, education or training (NEET) rate that, despite recent declines, remains twice the EU average.

In turn, these obstacles within the education system have weighed on labour productivity, which stagnates below 40% of the EU average. Lifelong learning could help address these imbalances, yet participation reaches only 20% of the EU average. The region’s limited innovation activity, the cluster’s weakest indicator, further holds back productivity, with patent applications at just 2% of the EU average, pointing to low levels of investment in research and development (R&D) and weak commercialisation of research and innovation.

Business Environment

Business Environment is the region's best-performing cluster and has converged the fastest over the past decade.

 

The region has established itself as a strong destination for foreign direct investment (FDI). Net inflows into tradable sectors are four times the EU average, supported by an open regulatory environment and generous investor incentives, including tax breaks and special economic zones. This performance has nonetheless not yet translated into broader trade dynamics. Despite steady progress, trade flows remain around 30% of the EU average, held back by a limited industrial base and persistent non-tariff barriers.

Access to affordable financing remains a major bottleneck, particularly for small and medium-sized enterprises (SMEs). Domestic credit to the private sector is 30% below the EU average, reflecting continuous bank risk aversion despite the introduction of public credit guarantee schemes in some economies. Meanwhile, banking sector stability has improved, as reflected in the decline in the non-performing loan (NPL) ratio, which fell from an average of 13.6% to 3.4% over the past decade.

Corruption and informality also continue to undermine fair competition and deter investors. Perceptions of corruption have worsened in some economies, partly due to weak political commitment and enforcement challenges. High levels of informal employment, often linked to low productivity levels, are further exacerbated by high labour taxation and underdeveloped social security systems.

Private investment, though broadly in line with the EU average, remains insufficient to sustain rapid economic convergence. In addition to gaps in access to finance and an uneven competitive environment, an underdeveloped innovation ecosystem constrains firms’ ability and incentives to invest. Business creation, which can also help spur private investment, remains below the EU average in most Western Balkan economies, further hampered by administrative burdens associated with business entry and operations.

Digital Transformation

Despite recent convergence, Digital Transformation’s overall performance remains modest.

 

The region’s population enjoys strong digital connectivity, with internet usage levels matching the EU average. Digital engagement is gradually catching up, with internet use for online purchases and for interacting with public authorities rapidly converging, though the latter remains held back by the non-universal availability of digital public services and low awareness of existing services. Security concerns also weigh on engagement across the region, as cybersecurity infrastructure remains weak, with secure internet servers accounting for only 6% of the EU average. Limited digital skills further prevent the region from fully benefiting from digital transformation, with the share of the population reporting at least basic digital skills standing at around 40% below the EU average.

Businesses are increasingly embracing digital tools, yet adoption remains largely concentrated in basic solutions. Many firms use digital tools to strengthen their market presence, with website adoption broadly in line with the EU average. However, the uptake of more advanced technologies remains limited. AI adoption is about 35% below the EU average, reflecting businesses’ limited readiness to adopt the latest digital technologies.

Nonetheless, the information and communication technology (ICT) sector has emerged as a driver of economic growth in recent years. ICT services exports have converged rapidly, reaching 56% of the EU average in 2023-2024, up from 42% in 2020-2022. Several factors underpin this trajectory: targeted policies to attract investment, expanded infrastructure for start-ups, and a young, digitally skilled workforce that has drawn outsourcing from foreign firms.

Greening

The Greening cluster recorded the highest share of worsening outcomes across all clusters, with a marked divergence from the EU. This widening gap stems from two dynamics: progress that was outpaced by the EU's in relative terms, and performance that stagnated or declined in absolute terms.

 

Although the Western Balkans have started to implement policies aimed at a greener economy, progress remains slow, particularly in reducing carbon emissions. The region still relies heavily on fossil fuels, with coal accounting for a substantial share of electricity generation. While investments in renewable energy have increased, they remain, in most economies, insufficient to enable a large-scale transition towards decarbonisation. Moreover, the region's renewable energy mix remains undiversified, with a heavy reliance on hydropower, underscoring the need to expand other clean sources to mitigate environmental concerns and climate change risks. Carbon emissions have significant implications for human health across the region, with premature deaths attributable to air pollution remaining more than three times the EU average, undermining human capital through lost productivity.

The region also uses energy, materials, and water less efficiently than the EU. On average, Western Balkan economies’ energy productivity remains 20% lower than the EU's, meaning more energy is used to generate the same economic output – this partly reflects the low energy efficiency of production and consumption. The region also generates nearly twice as much waste per unit of output as the EU and sends most of it to landfill, around three times the EU average, having built limited capacity to sort, collect and recycle. Water use shows similar constraints, with productivity slightly below 25% of the EU average, reflecting the region's high reliance on water-intensive thermal power generation, compounded by ageing, inefficient water infrastructure, and extensive irrigated agriculture.