The minimum wage increased in all countries of the Region in 2025, in Albania it still remains the lowest

Countries in the Region have continued to experience strong wage growth even though labor productivity is no longer keeping up.

Bosnia and Herzegovina had the largest wage-productivity gap, while Serbia had the lowest, as wage growth was accompanied by a similar productivity increase of 7 percent, according to a recent World Bank analysis in the latest economic report for the 6 Western Balkan countries.

As of January 2025, the largest increase in the minimum wage in the region was observed in the Federation of Bosnia and Herzegovina (FBiH), where the minimum wage increased by 60 percent to 892.3 euros.

In Republika Srpska, the minimum wage reached 1,023.5 euros from around 687.4 euros previously, regardless of the educational level of employees.

As part of regular indexation, minimum wages in Serbia and North Macedonia increased by 13.2 and 8.1 percent, respectively, for 2025. The highest minimum wage in the region remains in Montenegro after last year's increase, which also differentiates employees based on their level of education.

Meanwhile, the minimum wage in Albania remained unchanged at around 404 euros, while Kosovo's minimum wage, at 350 euros, is far ahead of the region.

Serbia recorded the highest average real wage growth in 2024, at 9.1 percent, followed by North Macedonia, at 9.0 percent. Albania, and Bosnia and Herzegovina recorded an average real wage growth of around 8 percent, while Montenegro followed with an increase of 6.9 percent.

Wage growth was at least double the productivity growth in most economies in the Region.

The World Bank suggests that the six Western Balkan countries can boost their prospects by accelerating the implementation of structural reforms. The countries continue to face significant challenges, such as low labor market participation, high levels of informality, and slow productivity growth.

These issues hinder economic progress and limit the potential for sustainable development.

Developing the domestic private sector is essential for generating employment opportunities and fostering innovation, which are essential for long-term growth.

Despite progress in reducing unemployment over the last decade, the region still faces significant structural challenges. In 2024, unemployment averaged 10.1 percent, with notable variations across countries (ranging from 8.6 percent in Albania and Serbia, to 12.6 percent in Bosnia and Herzegovina.

Youth employment remains a critical concern, with an average unemployment rate of 25 percent, while female labor force participation is only 45 percent, compared to 64.2 percent for men. Inactivity averages 45.4 percent of the working-age population.

High levels of informality and the outmigration of skilled workers further limit growth prospects.

Meanwhile, increasing weather hazards, such as extreme heat, drought, flooding, and changing rainfall patterns, further reduce worker productivity, increase occupational health risks, damage productive assets, and disrupt key economic sectors that depend on stable weather conditions, such as agriculture, construction, and tourism./Monitor