Competitiveness and growth
A competitive economy in the Western Balkans is good for the region and good for Europe. The EU has long supported economic development in the Western Balkans. Yet big gaps in prosperity between the region and the EU remain.
That’s why the EU is stepping up support with the Economic and Investment Plan. Aligned with EU goals towards a greener and digital future, and backed with large-scale funding, this is the chance to build a more innovative, greener, and fairer economy for the future.
What are the challenges?
The Western Balkans are closely linked with the EU. The EU is their largest trade partner and investor. Yet despite much progress – in social and economic development, poverty reduction and improved living standards – the region’s economies continue to lag behind the EU.
- The region faces continued challenges from weak competitiveness, high unemployment and significant brain drain.
- Poor governance and limited progress in tackling corruption are also major factors hampering growth.
- The COVID-19 pandemic has exacerbated these inequalities. Businesses have closed, jobs cut and livelihoods jeopardised.
- According to the World Bank, the region suffered its worst economic downturn on record in 2020. This was a direct result of the devastation brought on by the pandemic, and halted a decade of earlier progress.
Working together is vital to closing the gap, limiting social damage, and stimulating the business environment.
How is the EU responding?
As neighbours and aspiring EU members, the EU is committed to narrowing these inequalities, and building more resilient and competitive economies in the Western Balkans.
This means supporting the necessary reforms required to align with EU standards, while also providing funding and investment to reduce the development gap and make the economies more competitive. Collaboration is at the heart of this support.
Working with governments, private companies and banks in the region, as well with International Financial Institutions (IFIs) and Development Finance Institutions (DFI) of EU member states, the EU has been supporting economic development for decades – through large-scale investment in transport and energy infrastructure projects, the private sector, innovation, and research, education, and much more.
The EU accounts for 70% of total trade of the Western Balkan region
EU companies account for 65% of Foreign Direct Investment in the Western Balkans
Ongoing support
The EU’s Economic and Investment Plan for the Western Balkans (EIP) takes this to another level. This will bring up to €9 billion in grant funding for investment in sustainable transport, clean energy, the green and digital transition, competitiveness of the private sector and skills.
The EIP also introduces the creation of a Western Balkans Guarantee, expected to boost the investment capacity of the region – with the ambition to raise potentially up to €20 billion in investment across all priorities.
-
Sustainable transport – Extending Trans-European Transport Network (TEN-T), with the aim of bringing the core network up to EU standards, promoting greener transport options, and creating stronger links in the region and with the EU.
-
Clean energy – Increasing the share of renewables in the energy mix, decarbonising energy systems and stepping up energy efficiency-in line with the EU’s long-term ambition of achieving carbon neutrality by 2050.
-
Environment and climate – Large-scale support for the green transition, decarbonisation, depollution of air, water and soil, circular economy and promoting biodiversity, urban mobility and green transport solutions – in line with the EU Green Deal priorities.
-
Digital economy – Increasing support to deployment of broadband infrastructure, with a focus on connecting rural areas, as well as to digital skills and promoting cooperation in digital education.
-
Private sector and business –Strengthening the competitiveness of micro and SMEs in strategic sectors, while stimulating innovation and transition to the ‘green’ economy.
-
Education and skills – Stepping up support to high quality education and training systems, employment, health and social protection, with a particular focus on helping employment opportunities for young people and women, vulnerable groups and minorities, in particular Roma
The EIP will also help to support the development of the Common Regional Market – a potential game changer to attract more investment to the region, address the current economic fragmentation, and bringing the region closer to the EU and its single market.