Brussels – As part of the European Union’s years-long effort to promote regional integration in the Western Balkans – a strategy aimed at bringing the six countries closer to alignment with EU standards – questions are increasingly being raised about whether the regional market can truly develop without deeper integration at the continental level.
“In the long term, there are limits to how much these economies can grow within such a small regional market. Expectations for the Common Regional Market must be realistic, it cannot replace the EU Single Market,” said Nina Vujanović, Affiliate Fellow at Brussels-based economic think tank Bruegel, in an interview with The New Union Post.
Drawing on analysis from a Bruegel working paper on intra-Western Balkans dynamics, which she co-authored, Vujanović noted that other countries – such as EU member states in Central and Eastern Europe, as well as candidate countries like Moldova – “are not subject to the same persistent pressure to cooperate economically with their neighbours” (due to complex inherited relations). And while economic cooperation in the Western Balkans remains “important and beneficial” for all national economies, she emphasised that “focusing on integration into the EU Single Market can yield far greater economic benefits.”
Limits of the Western Balkans’ Regional Common Market
Since 2006, the Central European Free Trade Agreement (CEFTA) – a multilateral trade agreement establishing a trade bloc among all Western Balkan economies, along with Moldova – has sought to eliminate tariffs and facilitate the free movement of goods. However, “our study finds that certain path dependencies remain,” indicating that trade within the region is still largely shaped by bilateral, country-to-country relationships.
Many of the countries that were once part of Yugoslavia maintain “strong economic ties” with the largest Western Balkan economy – Serbia – while Kosovo trades “far more with Albania than with the rest of the region.” This is hardly surprising, given the ongoing political tensions between Kosovo and Serbia, which continue to hinder their economic relations and Pristina’s integration into the broader political and trade framework.
With “untapped potential for deeper regional integration” beyond CEFTA, Vujanović noted that “this is precisely why the Common Regional Market was established in 2020” – as a regional economic area for the Western Balkans, grounded in EU rules and standards. “It reflects the broader EU objective of encouraging stronger integration among these economies,” she added.
Yet the limitations to this goal are clear – starting with the “significant” impediments to trade, particularly in goods. While tariffs have been removed within the region, “substantial” non-tariff barriers remain. For instance, Vujanović pointed to “long border waiting times persist due to duplicated cross-border checks and inadequate infrastructure,” amounting to 28 million hours annually. Such delays, she noted, reduce the region’s GDP “by around one percentage point” every year. Moreover, shortcoming in road and rail infrastructure further restrict trade flows, “with many routes still operating with only a single lane for freight trucks.”
While opening borders and facilitating the free movement of goods is undoubtedly “economically important,” the six Balkan economies together “represent a relatively small market—roughly the size of Romania,” Vujanović stressed. An analysis of the region’s economic, social and trade framework reveals a combined population of around 17 million – reflecting “limited consumer potential” – and a position “at the lower end of global value chains,” with production that often lags in terms of technology. Even with open borders, a key question remains: “What exactly do these countries trade?”
In this context, developing a regional value chain in the Western Balkans a significant challenge, as “the market is too small and the firms operate at a very similar level of technological advancement,” Vujanović noted. A successful regional value chain depends on diversified markets, yet the Western Balkans show “insufficient” economic diversification: Albania and Montenegro are predominantly service-based, Kosovo relies heavily on mining, while Bosnia and Herzegovina, Serbia, and North Macedonia maintain relatively strong manufacturing sectors.
No substitute fo the EU Single Market
The analysis by the Brussels-based economic think tank builds on the renewed focus on the Common Regional Market, reinforced by the EU Growth Plan for the Western Balkans adopted in May 2024. Establishing a free trade area for goods, services, capital, and labour forms one of three key pillars in the EU’s strategic reorientation towards the region – alongside deeper integration into the EU Single Market and a €6 billion financial instrument, tied to progress on EU-related reforms.
Taking into account the major non-tariff barriers to trade and the need for further investment in regional connectivity, Vujanović acknowledged that the Common Regional Market is, in itself, “a highly valid initiative.” At the same time, the idea of replicating the EU Single Market within the region “overlooks the limited potential for growth that such a framework can offer.” In other words, while promoting deeper integration among the Balkan economies, the Common Regional Market “cannot serve as a substitute for full integration into the EU Single Market.”
For this reason, the Affiliate Fellow at Bruegel drew attention to the benefit of the integration into the EU Single Market for EU candidate and potential candidate countries. In particular, those deemed closer to EU accession – Montenegro, Albania, and “arguably” North Macedonia – have “significantly greater potential to integrate directly with the EU market than with a regional one.”
