Countries in the Western Balkans and Eastern Partnership regions are gradually closing the economic gap with the European Union, a report by the Brussels-based think-tank Bruegel has found, but they still face major challenges in demographics, labour markets and institutional reform.

The analysis covers nine current and potential EU candidates: the six from Western Balkan countries, plus three from the EU’s Eastern Partnership, Georgia, Moldova and Ukraine. Despite their diverse backgrounds, the countries share the common ambition of securing EU membership.

According to Bruegel, most of the candidate countries have made progress in catching up economically with the EU since 2003, when the Thessaloniki Summit first extended a promise of EU membership to the Western Balkans. However, the pace of convergence has varied widely, and even the top performers remain significantly below the EU average in income per capita.

“In GDP per capita terms, since 2003, all candidate countries except Ukraine have converged somewhat towards the EU average, but starting from a low level,” the report said. 

Montenegro and Serbia are now at about 50% of the EU average, followed by Georgia and North Macedonia, while Moldova, Kosovo and Ukraine remain below one-third.

Montenegro leads, Ukraine lags

Montenegro and Serbia lead the pack in terms of GDP per capita, while Georgia has recorded the fastest pace of convergence, rising 29 percentage points (pp) relative to the EU average over the 21-year period. Ukraine, by contrast, has stagnated due to repeated shocks, including the 2009 global financial crisis, political instability and Russia’s military aggression in both 2014 and 2022.

“Ukraine is a special case,” Bruegel said. “Between 2003 and 2008, it was among the three countries with highest GDP per capita in our sample. However, it has experienced three de-convergence periods in 2009 (consequences of a global financial crisis), 2013-2015 (effects of domestic political instability and the first stage of Russian aggression) and 2022 (the full-scale Russian aggression).”

The report argues that the relatively stronger performance of the Western Balkan countries compared to their Eastern counterparts is partly a result of earlier EU engagement, which brought greater foreign investment, trade and institutional reforms.

“The rapid GDP per capita convergence of the three newest EU countries suggests EU integration plays a positive role in growth acceleration. Between 2003 and 2024, the gaps between them – especially Bulgaria and Romania – and Western Balkan countries increased.” 

Bulgaria and Romania, which joined the EU in 2007, recorded GDP per capita increases of 26 pp and 30 pp respectively between 2003 and 2024, significantly outpacing the candidate countries.

Demographic decline undermines progress

Yet even as incomes inch upward, demographic trends are moving in the opposite direction. All candidate countries except Montenegro have seen population declines over the past two decades, some of them dramatic.

Bosnia & Herzegovina’s population shrank by 24% between 2003 and 2023, followed by Ukraine (22%), Moldova (16%), and Serbia (12%). Similar declines have been recorded in new EU members, including Bulgaria (18%) and Romania (12%), indicating a broader regional pattern of emigration and low fertility.

Bruegel attributes the demographic slide to a combination of negative natural population growth, limited improvements in life expectancy, and ongoing outward migration.

“Depopulation is a consequence of declining fertility rates, limited progress in increasing life expectancy and net outward migration,” the authors wrote.

Fertility rates have fallen across the board but remain somewhat higher in Georgia, Montenegro and Moldova than in other candidate countries or the EU average of 1.39 births per woman. Ukraine, ravaged by war, saw its fertility rate fall below 1 in recent years.

Life expectancy, particularly for men, remains a concern in many countries. The report highlights stark gender disparities and significant gaps compared to the EU average of around 84 years for women.

“The difference compared to both the EU average and female life expectancy is particularly large in Georgia, Moldova and Ukraine … suggesting poor quality healthcare services and unhealthy lifestyles,” Bruegel said.

Labour market trends mixed

On the labour front, candidate countries have generally improved labour force participation rates, especially among women. Albania and Moldova stand out, with female LFP rising by more than 10pp since 2003. However, in countries like Bosnia and Montenegro, female participation remains below 55%, far behind the EU average of 70%.

Male labour force participation remains higher but has plateaued or declined in some countries, notably Georgia and Ukraine. The gender gap in labour force participation continues to hover between 15 and 20 pp in most candidate countries, compared with 9.5 pp in the EU.

Bruegel notes that post-Soviet countries historically had higher female labour force participation rates than former Yugoslav states, though these differences have gradually narrowed.

Rising participation rates and shrinking working-age populations have helped reduce historically high unemployment, particularly in the Western Balkans. North Macedonia’s jobless rate has dropped from 37.3% in 2005 to 13.4% in 2024, while Serbia and Bosnia have seen similar gains.

Nevertheless, youth unemployment remains persistently high across the region. In 2024, it stood above 25% in most Western Balkan states — well above the EU average and the rates seen in Bulgaria, Croatia and Romania.

Slow enlargement may drag on growth

The report points to the role EU accession can play in accelerating economic development. Citing the experience of Bulgaria, Romania and the 2004 wave of enlargement, Bruegel argues that the accession process, if sufficiently advanced, can serve as a powerful economic catalyst.

“GDP per capita convergence could have been more rapid had the EU enlargement process moved faster,” the authors wrote, adding that access to the EU single market and budget, as well as regulatory alignment, were crucial growth drivers for earlier joiners.

In contrast, the three Eastern Partnership countries Georgia, Moldova and Ukraine only signed association agreements with the EU a decade ago and received membership offers much later than their Western Balkan peers. The ongoing war in Ukraine has further impeded economic development not only there but also in neighbouring Moldova.

Bruegel concludes that while convergence is underway, significant hurdles remain. Accelerating integration could help narrow income gaps more quickly, but demographic decline and labour market inequalities must also be addressed if these countries are to meet the standards of EU membership.

The EU has rekindles its enlargement agenda in the wake of Russia’s invasion of Ukraine, but the report still highlights the need for a more proactive approach — not only to help the candidate countries grow, but to secure the EU’s broader geopolitical interests.

“Today, renewed momentum for enlargement is driven not only by long-term convergence goals but also by geopolitical considerations following Russia’s invasion of Ukraine,” Bruegel said.