OECD South East Europe Regional Programme

Climate change and environmental degradation are increasingly affecting people’s lives, disrupting economies and transforming ecosystems, with the Western Balkans being no exception. The green transition offers a pathway to mitigate these effects and foster a more sustainable future, while unlocking the potential for enhanced competitiveness and resilience in the face of evolving global challenges.

The private sector plays a vital role in driving economic performance and fostering sustainable, inclusive development. However, policies in the Western Balkans designed to support entrepreneurship and ensure the growth and resilience of the private sector lag behind those of the OECD and EU member countries. This is especially relevant for small and medium-sized enterprises (SMEs). While they represent 99% of all enterprises in the region, generate 65% value added and account for 75% of employment, SMEs still need tailored policies and public support to address the specific challenges they face and maximise their contribution to economic growth.

High levels of corruption and lack of transparency are key constraints to economic growth in many countries worldwide. Corruption hinders both public and private sector productivity, perpetuates inequality and poverty, and undermines opportunities to participate equally in social, economic and political life. Integrity is a cornerstone of good governance; it is essential for building strong institutions and restoring trust. In South East Europe, businesses continue to face high levels of corruption and lack of transparency which constraint economic prosperity and competitiveness. 

The six Western Balkans economies are advancing their digital transformation agendas by reforming their public administrations into user-centric public services using digital technologies and increasing the accessibility and transparency of public sector data. While digital transformation can spur innovation and improve services, the prevalent low digital literacy threatens the deepening of a digital divide and slow down the digital transition.

Despite significant strides in economy convergenge to the EU, the Western Balkans' GDP per capita still lags behind, standing at only slightly over one-third (38%) of the EU and OECD averages. In order to accelerate socio-economic convergence to the EU and OECD standards, the region needs to speed up the pace of reforms to improve the business environment, skills, greening and digitalization.

Strenghening the region's competitiveness requires a comprehensive, inclusive, and growth-oriented approach to policymaking. Against the backdrop of enhanced European Union accession prospects and a drive towards deeper regional integration, the six Western Balkan economies and undertaking holistic policy reforms to contribute to their countries' productivity, prosperity and relience.

The project Digital and Green SMEs: Accelerating the Twin Transitions in the Western Balkans is implemented by the OECD SEE Regional Programme with the financial support of Croatia. Throughout 2024-2026 the project will help all six Western Balkan economies sustainably digitalise their SME sectors and reach the targets set in the Digital and Green Agendas for the Western Balkans.