Human capital has emerged as the defining variable for the future trajectory of the Western Balkans. In an era marked by technological acceleration, geopolitical uncertainty, and intensified global competition, the ability of countries to develop, retain, and productively utilise human capital is now more consequential than traditional production factors. Economic convergence with the European Union (EU) will depend not merely on macroeconomic stability or integration processes, but on whether the region succeeds in transforming its education systems, labour markets, and institutional frameworks to fully unlock the potential of its people.

The Growth Challenge: A Region Developing, Yet Not Converging Fast Enough

Recent analyses by the World Bank (2024) and IMF (2024) suggest that while growth in the Western Balkans remains positive, it is not sufficient to close the gap with the EU. Real growth projections of around 3–3.2% remain below what is needed to enable faster income convergence. More importantly, productivity remains structurally weak: output per hour worked remains below 40% of the EU average, indicating that the region’s development model relies excessively on labour quantity rather than labour quality and technology adoption.

This gap is not simply a macroeconomic phenomenon. It reflects deep structural constraints in skills formation, innovation ecosystems, education quality, and labour-market adaptability. Without comprehensive reforms in these areas, the region risks falling behind during a period when knowledge, data, and technology are reshaping global competitiveness.

Education Systems Under Strain: Progress, Yet Persistent Mismatches

OECD assessments (2024) note that Western Balkan countries have made significant progress in modernising curricula, aligning quality assurance mechanisms with EU standards, and investing in teacher training. Yet the gap between policy design and classroom implementation persists. Foundational skills—literacy, numeracy, critical thinking—remain uneven, while employers increasingly report shortages in digital skills, managerial capabilities, and problem-solving competencies.

This structural mismatch is compounded by demographic trends. The Western Balkans continue to experience significant outward migration of highly educated workers, resulting in a “double loss”: public investment in education followed by the transfer of human capital to advanced EU labour markets. The RCC (2025) estimates that the cost of educating emigrants amounts to billions of euros annually when combined with lost output. The region’s most valuable resource—its youth—continues to be developed domestically yet realised abroad.

Human Capital as the Basis of Economic Convergence

The World Bank’s Human Capital Index (2023) underscores that a child born in the Western Balkans will reach only around 60–70% of their potential productivity, given current education and health conditions. This is not merely a statistic; it represents lost competitiveness, lower innovation potential, and reduced societal well-being. At a time when all Western Balkan states are seeking to accelerate EU integration, human capital cannot remain a marginal policy domain. It must be positioned at the core of the region’s growth strategy.

The emerging global economic landscape—shaped by digitalisation, the green transition, and artificial intelligence (AI)—increases the urgency. Countries that fail to adapt their skill bases to these paradigms risk being permanently locked out of higher-value production networks.

The EU Growth Plan: A Unique Opportunity to Align Human Capital with Market Access

The EU Growth Plan for the Western Balkans (European Commission, 2023) represents a transformative opportunity. By enabling gradual access to segments of the EU Single Market and supporting deeper regional economic integration, the plan provides both the incentives and the financial instruments to accelerate human capital reforms.

To maximise impact, human capital should be fully embedded in each country’s Reform Agenda—aligning education, skills development, digital transformation, and labour-market reforms with broader economic integration objectives. A competitive labour force is essential for attracting foreign direct investment, fostering innovation, and enabling participation in regional value chains.

Regional cooperation also plays a critical role. The Common Regional Market agenda, supported by the RCC (2023), has demonstrated the benefits of harmonising standards, reducing administrative barriers, and improving labour mobility. A logical next step is the development of a Regional Skills and Talent Area, including mutual recognition of qualifications, harmonised skills standards, and regional apprenticeships in key sectors.

The Transformative Potential of AI for the Western Balkans

Artificial intelligence is rapidly reshaping labour markets, production systems, and public services. According to the European Parliamentary Research Service (2023), AI is becoming a critical determinant of competitiveness across Europe. IMF research (2023) demonstrates that AI can significantly boost productivity—provided countries have a sufficiently skilled workforce and complementary investments.

For the Western Balkans, AI presents both an opportunity and a challenge. If integrated into education and training systems early—through digital literacy programmes, AI-enhanced pedagogy, and strong teacher development—AI can become a catalyst for leapfrogging productivity. Conversely, failure to adapt will widen the development gap between the region and the EU.

Integrating AI into schools, universities, and vocational training requires a coordinated approach: infrastructure investment, teacher training, curriculum renewal, and an enabling regulatory environment aligned with emerging EU guidelines.

A Policy Agenda for the Future: Five Strategic Priorities

Human capital is the Western Balkans’ most strategic asset, and our ability to compete, innovate and converge within the EU will depend entirely on how effectively we develop it.
 To unlock this potential, five key shifts are essential:

1. From brain drain to brain circulation. Creating opportunities to stay, grow and return through targeted scholarships, diaspora engagement, and strong remote-work ecosystems.
2. From education systems to learning ecosystems. Strengthening links between schools, universities, and industry, expanding dual education and adopting models for lifelong learning.
3. From fragmented efforts to a regional human capital compact. Aligning skills standards and recognizing diplomas, setting shared regional targets and developing joint STEM and AI programmes to enhance competitiveness.
4. From analogue to digital and AI-ready education. Ensuring every student has access to connectivity, well-trained teachers and foundational skills in AI and data literacy.
5. From short-term projects to long-term investment in people. Protecting budgets for education, health, and R&D, while leveraging EU funds to catalyse private investment in skills.

Conclusion

The future of the Western Balkans depends on the intelligence, creativity, and aspirations of its people. To bridge borders—both physical and developmental—we must invest in the individuals who will lead our economies, institutions, and societies in the decades ahead. Human capital is not merely a component of economic policy; it is the foundation upon which convergence, stability, and prosperity will be built.

The region stands at a crossroads. With the EU Growth Plan, strengthened regional cooperation, and strategic investment in skills and education, the Western Balkans can transform its development trajectory and secure a more competitive, inclusive, and innovative future. But this requires sustained political commitment and a clear recognition: our greatest asset is our people, and investing in them is the surest path to long-term prosperity.

Our future will not be determined by what we have, but by what we know and what we can do. If we invest in our people, the Western Balkans can bridge borders, close development gaps, and build a competitive European future.

References

European Commission. (2023). EU Growth Plan for the Western Balkans. Publications Office of the European Union. https://neighbourhood-enlargement.ec.europa.eu

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European Parliamentary Research Service. (2023). Artificial intelligence and employment: Preparing the workforce for AI disruption in Europe. European Parliament. https://www.europarl.europa.eu/thinktank

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World Bank. (2024). Regional Human Capital Mobility and Brain Drain Dynamics in the Western Balkans. World Bank Group. https://www.worldbank.org

World Bank. (2024). Western Balkans: Skills, Productivity and Growth. World Bank Analytical Paper. https://www.worldbank.org