Growth and EU Integration​

The WB 6 economies are each year closer to joining the EU. Out of those 6 economies, 4 have status of candidate countries (Montenegro, Serbia, North Macedonia and Albania), while 2 have the status of potential candidates (Kosovo and Bosnia and Hercegovina). Since July 2022, the Commission started the screening process with North Macedonia and Albania. All Western Balkans partners have Stabilisation and Association Agreements with the EU that provide the overall framework for the their mutual relations.

Western Balkan economies are an important EU partner, with 18 million consumers and almost 70% of the region’s total trade in 2021. The region is an important market for the EU, but also a transit area for the European and international goods. The region has a good growth potential with educated and skilled labour force, while companies from the EU are investing in the region and account for over 61% of the regional FDI stock in 2020. However, the WB-6 economies are still behind the EU economic level of development. According to the 2021 data, GDP growth in the WB-6 reached 7.4 percent after a contraction of 3.2 percent in 2020.

Macroeconomic trends are just indicators explaining economic activity that reflects the level of competitiveness, productivity, business climate, human capital, and innovation capacity of the economy. However, it is important to analyse those trends to monitor and provide evidence for the results of different policy measures. That is why one of the goals of WEBecon is to monitor economic developments in the WB-6 economies through analysis of main macroeconomic trends and developments. Also, WEBecon works on the development of different tools for projections of economic activity using different projection techniques such as econometric modelling, scenario development, Foresight analysis etc. Growth in WB-6 countries is influenced also by global trends such as COVID 19 pandemic, Ukrainian war, gasoline shortages etc. This is why WEBecon, on the basis of analysis, facts, data and literature, tries to make contribution to the decision-making process in the region by increasing awareness and providing educated insights on new development challenges.  

Several initiatives are considered important for WB-6 growth and integration in the EU and are also areas of interest for the work of WEBecon.

The latest initiative through which EU is supporting WB-6 integration isthe Western Balkans Strategy which also includes am Action Plan in Support of the Transformation of the Western Balkans. The Action plan defines activities in six Flagship Initiatives targeting specific areas of interest for both the EU and the Western Balkan economies: to strengthen the rule of law, to reinforce engagement on security and migration, to enhance support to socio-economic development, to increase transport and energy connectivity, an initiative for a digital agenda and an initiative to support reconciliation and good neighbourly relations. Out of the areas covered by the Strategy, primarily socio-economic development, but also transport and energy connectivity and digital agenda are areas which are of the interest for the research and analytical work of WEBecon.

This Economic and Investment Plan is EU’s plan for further integration of the WB-6 region. The Plan aims to spur the long-term recovery – backed by a green and digital transition – leading to sustained economic growth, implementation of reforms required to move forward on the EU path and bringing the Western Balkans closer to the EU Single Market. It aims to unleash the untapped economic potential of the region and the significant scope for increased intra-regional economic cooperation and trade. Different investment facilities and agreements would be used to ensure swift deployment of the investment package to:

  • strengthen core infrastructure links, in particular main transport and energy connections, which are instrumental for economic development, market integration and cross-border trade within the region and with the EU,
  • support the green and digital twin transitions;
  • increase competitiveness of the private sector, boost innovation and the development of essential social sectors;
  • connect economies through strengthened regional economic integration and integration with the EU.

The Economic and Investment Plan identifies 10 investment flagships in the following areas: sustainable transport (3 flagship initiatives), clean energy (3 initiatives) environment and climate (1 flagship), digital future (1 flagship), boosting the private sector (1 initiative) and investing in human capital (1 initiative). Also, special part of the plan is dedicated to the connect economies through strengthened regional economic integration or common regional market. Although all mentioned areas covered by the action plan are of our interest, the part related to the common regional market is area which will be a priority for WEBecon’s research.

The Common Regional Market adopted by the Western Balkans Leaders in 2020 is seen as a stepping-stone to integrate the region more closely with the EU Single Market already before they join the Union. According to a World Bank study, such an enhanced market integration of the Western Balkans could bring an additional 6.7% growth to the region. The Action Plan for the implementation of the Common Regional Market is made up of targeted actions in four key areas:

  • Regional trade area: free movement of goods, services, capital and people, including crosscutting measures, such as the Green Lanes, to align with EU-compliant rules and standards and provide opportunities for companies and citizens;
  • Regional investment area, to align investment policies with the EU standards and best international practices and promote the region to foreign investors;
  • Regional digital area, to integrate the Western Balkans into the pan-European digital market; and
  • Regional industrial and innovation area, to transform the industrial sectors, shape value chains they belong to, and prepare them for the realities of today and challenges of tomorrow.

In line with the areas that are covered by the Common Regional Market, several streams are covered by WEBecon’s research: free movement of people, goods and services and standardisation procedures that may enable this, reginal value chains in industrial production but also in service sectors as well as innovation area in a regional context. Also, areas that are covered by the internal market in the negotiation process such as: competition policy, financial service as well as consumer and health protection.

In addition to the preconditions for WB-6 integration into the EU internal market, WEBecon focuses its activities on the preconditions related to the competitiveness and inclusive growth. In these areas, WEBecon provides analytical support in the process of monitoring and policy formulation, as well as involvement and education of the interested stakeholders.

The Green Agenda for the Western Balkans is embedded in the Economic and Investment Plan. It presents a new growth strategy for the region, leaping from a traditional economic model to a sustainable economy, in line with the European Green Deal. WEBecon focuses its expertise and analytical capacities on an assessment of the potential of circular economy to support the economic growth in the region as one of the issues covered by the WB Green Agenda.

As of 2015, all WB-6 economies submit annual Economic Reform Programmes (ERP) to the European Commission. They are an expanded version of the previous Pre-Accession Economic Programmes. The ERPs contain medium-term macroeconomic projections (including for GDP growth, inflation, trade balance and capital flows), budgetary plans for the next three years and a structural reform agenda. The structural reform agenda includes reforms to boost competitiveness and improve conditions for inclusive growth and job creation. The European Commission and the European Central Bank (ECB) both make assessments of the ERPs that are submitted to the Council of Ministers for direct discussions with the enlargement countries. These important documents and the whole process of its creation is also in the focus of WEBecon. WEBecon provides support in the creation of the Programmes by contribution to the public debates and to the evidence-based monitoring activities.

The above-mentioned sub-topics are just a handful of the many on which WEBecon works under the domain of Growth and EU Integration.