Western Balkans budgets for 2025

The 2025 budgets for the Western Balkans are shaped by the need for fiscal consolidation, improving the efficiency of public spending and aligning with EU standards, with particular attention to the defense, infrastructure and energy sectors. These efforts aim to address past challenges and ensure successful EU integration.

Below are the key details for each sector in each of the BP6 countries

Serbia’s 2025 budget, presented by the Ministry of Finance, allocates a total of 2,660.2 billion dinars in spending, with a significant portion directed towards economic growth, public sector wages, defense, infrastructure and social welfare. Here are the key allocations and priorities from the ministry, along with the challenges and criticisms facing the government

Key budget allocations

Public Sector Wages

8% for all public sector employees, with an 11% increase for the education sector. The minimum wage will also increase by 13.7%.

While the wage increases are seen as positive for public employees, critics argue that this could further strain the budget, especially in the context of public debt and efficiency concerns.

Defense Budget

Considerable resources have been allocated to modernizing Serbia’s military, with a focus on improving equipment and strengthening the defense sector to align with NATO standards. This is a key priority, especially given regional geopolitical instability. The defense budget, while important for regional stability, diverts resources from urgent domestic needs such as health and education.

Infrastructure Investment

Large sums are being dedicated to road construction, especially high-speed highways, and energy infrastructure, reflecting the government’s efforts to modernize the economy.

The focus on large infrastructure projects, such as highways, has led to concerns about Serbia’s rising public debt, which is expected to remain under control but remains a long-term challenge.

Pension Increase

Pension increases are a central feature of the budget, with the aim of raising the average pension from 390 to 436 euros. Social welfare provisions will also see increases to support vulnerable groups.

Health Sector

Funding has been allocated to improve healthcare facilities, which have been underfunded in the past.

Critics of social welfare spending point to inefficiencies in distribution and the need for more targeted assistance to ensure that the most vulnerable benefit the most.

Investment in Agriculture

The largest ever budget allocation for agriculture—149.5 billion dinars—reflects Serbia’s push to increase food security and rural development.

While investment in agriculture is seen as necessary, concerns remain about the distribution of funds and the potential for misuse or inefficiency in rural development projects.

Education spending

The budget emphasizes reforms in education, including significant increases in teacher salaries.

There is an ongoing debate about the effectiveness of education reforms, with critics pointing to the need for structural improvements and better allocation of resources to ensure quality education.

Energy Sector

A portion of the budget is directed toward modernizing the energy sector, particularly investments in renewable energy.

Reliance on energy subsidies for households has been criticized for inefficiency and long-term fiscal burden. There is a need for a more sustainable approach to energy prices

Key challenges

Public debt

Serbia’s public debt, while lower than in some European countries, remains a concern, especially as large infrastructure projects continue to be financed through debt. Serbia’s debt-to-GDP ratio stands at 46.5%, well below the Eurozone average of 88.1%, but the sustainability of this debt will require ongoing management

Fiscal efficiency

While the budget includes significant wage increases and social welfare provisions, there is criticism of the efficiency of public spending. A significant portion of the budget continues to be allocated to public wages and subsidies, which could limit the funds available for long-term investment in infrastructure and innovation.

Geopolitical tensions

Serbia’s defense and foreign policy, including its relations with Russia and the EU, are complex. Some critics argue that the allocation for defense modernization could be politically motivated, potentially leading to greater reliance on foreign partnerships.

In summary, while Serbia’s 2025 budget sets ambitious targets for economic growth and modernization, it faces significant challenges related to debt management, spending efficiency, and geopolitical pressures. The defense allocation, while necessary for national security, raises concerns about prioritizing military spending over more immediate domestic needs such as education and healthcare.

Albania’s 2025 national budget has been approved at 822.7 billion lekë, reflecting the government’s push for significant investment in key sectors. The budget, more than double what the government spent in 2013, aims to stimulate economic growth, address infrastructure needs and improve social services.

Key allocations

Ministry of Health

A sum of 80.7 billion lekë has been allocated to health, the largest part of the budget. This will support improvements in healthcare facilities, the provision of essential medical services and a significant increase in salaries for doctors and nurses. The aim is to improve the quality and accessibility of healthcare

Ministry of Infrastructure

74 billion lekë has been earmarked for infrastructure, with major investments in road projects such as the Milot-Morinë road and the Orikum-Dukat road. This funding is essential for increasing connectivity and fostering regional development

Ministry of Education

The education sector receives 62 billion lek, an increase from previous years, to address overcrowded classrooms, improve the quality of education, and reduce inequalities in access to education.

Ministry of Defense

The defense budget has increased in line with the government’s focus on improving national security and meeting NATO standards

Social Welfare

The government has also allocated funds for pensions and social transfers, but critics argue that these provisions are insufficient, especially in light of inflation and rising living costs

Challenges and Criticism

Public Debt and Sustainability

The opposition has expressed concerns that the budget’s ambitious spending plan could worsen Albania’s public debt, which could increase further if large-scale projects and high public sector salaries are not matched by efficient revenue generation.

Efficiency of Spending

Critics argue that the focus on infrastructure may prioritize long-term development over immediate social welfare needs. Despite significant investments in roads and energy, questions have been raised about the transparency of public-private partnerships (PPPs) and whether these projects provide value for money.

Social Inequality

While significant resources have been allocated to healthcare and education, there is criticism that the government has not done enough to address growing social inequalities, particularly with regard to increasing pensions and targeted support for vulnerable groups.

In summary, Albania’s 2025 budget reflects ambitious development objectives, with a strong focus on infrastructure, healthcare and education. However, the sustainability of these spending decisions, the effectiveness of large-scale projects and the adequacy of social welfare provisions remain contentious issues.

Kosovo’s 2025 budget is set at 3.6 billion euros, reflecting an increase of nearly 9% compared to 2024, with the aim of boosting economic growth, creating jobs and improving living conditions for families. The budget focuses on strategic investments in key sectors, with a focus on infrastructure, defense, public sector wages and social services.

Key Allocations

Public Sector Wages

916.5 million euros allocated for public sector wages, including significant increases to adjust to Kosovo’s growth and inflation.

The government has projected a salary increase for public employees, aiming to raise salaries to 48.5% above 2019 levels.

Healthcare

105 million euros for the healthcare sector, aimed primarily at providing essential medicines, consumables and improving healthcare services

Infrastructure

930 million euros allocated for infrastructure, covering essential projects such as railways, regional roads and water supply systems, which are critical for economic development.

Defense

Kosovo’s defense budget will reach 208 million euros, approximately 2% of GDP, in line with NATO standards. This includes funding for military equipment and supplies

Educational and social services

Increased funding for education and social services is also included, although specific figures for these sectors were not detailed in the available sources.

Challenges and Criticism

Insufficient Citizen Support

Opposition parties, including the Democratic League of Kosovo (LDK) and the Democratic Party of Kosovo (PDK), have criticized the budget as insufficient to address the immediate financial strains on Kosovo’s population. They argue that it does not do enough to address issues such as the high cost of living or to provide for significant increases in pensions.

Short-term versus long-term focus

Some opposition figures argue that the budget is too focused on long-term infrastructure and defense projects, which may not address urgent social welfare needs. Calls for more funding for health, education and social benefits have been prominent

While Kosovo’s 2025 budget aims to boost sustainable growth and job creation through investment in key sectors such as infrastructure and defence, it has faced criticism for failing to address the immediate economic challenges facing citizens. The budget’s focus on long-term projects, while essential, may not meet the urgent needs of Kosovo’s population in the short term.

The draft budget of North Macedonia for 2025 is set at 4.6 billion euros (~ 283 billion denars), with the government aiming to address critical economic challenges, invest in infrastructure and improve social services, despite a projected fiscal deficit of 4% of GDP. equivalent to 41.3 billion denars). This budget reflects a focus on both fiscal consolidation and stimulating growth in the context of regional economic pressures.

Key allocations

Public Sector Salaries

A significant portion of the budget is allocated to public sector salaries, although specific figures were not detailed in the sources. There are ongoing adjustments of public salaries in line with inflation to maintain public employee satisfaction and service delivery

Healthcare

The government has allocated significant funds to improve healthcare, aiming to expand access to basic health services and support investments in medical infrastructure. Health spending remains a priority, but specific figures are not clearly stated

Infrastructure

A large share is taken up by infrastructure projects, especially in transport (railways, roads), energy (renewables) and water supply systems. This is part of North Macedonia’s aim to modernise its infrastructure to facilitate economic growth

Defence

North Macedonia’s defence budget will continue to meet NATO requirements, keeping €180m for defence purposes, in line with the 2% of GDP target for military spending.

Social Welfare

The budget includes investments aimed at improving social benefits, but critics have noted that poverty alleviation and unemployment remain ongoing issues, with limited funds directed towards stronger social safety nets.

Challenges and criticism

Deficit and debt management

A deficit of 4% of GDP has raised concerns about long-term fiscal sustainability. Critics argue that while the budget aims for economic growth, the deficit could lead to an increase in public debt, making future budgets more constrained.

Sustainability of wage growth

Increasing public sector wages is seen as necessary for social stability, but may not be sustainable in the long term, especially with the ongoing budget deficit.

Limited focus on immediate economic relief

Critics point out that while infrastructure projects are essential for future growth, the budget does not sufficiently address immediate economic challenges such as high unemployment and inflation, especially in the social welfare sector.

North Macedonia’s 2025 budget reflects the government’s commitment to both growth and fiscal stability, but it faces significant challenges. The projected fiscal deficit and long-term debt risks are major concerns, and the focus on infrastructure and defense could overshadow the immediate needs of social welfare and reducing unemployment. Critics argue for a more balanced approach to addressing urgent domestic issues alongside long-term planning.

The 2025 budget of Bosnia and Herzegovina (BiH) is structured to address domestic needs and international obligations, with a strong emphasis on reforms and external cooperation. However, the country’s complex political structure, with entities such as the Federation of BiH and Republika Srpska, creates challenges in budget coordination and allocation.

For 2024, Bosnia’s budget for state institutions was estimated at around BAM 1.35 billion. This includes indirect tax revenues, estimated at BAM 865 million, while the rest is allocated from local revenues. The budget covers a wide range of ministries, with key focuses on defense, justice, home affairs, and reforms related to EU integration. Challenges in financing have led to delays in budget approval, partly due to political disagreements and disagreements between the country’s entities (the Federation of Bosnia and Herzegovina and Republika Srpska) over the allocation of funds.

General Budget The 2025 BiH budget is expected to mirror last year’s size, at around BAM 1.36 billion, with a significant portion allocated to external debt service and core reforms

Key Allocations

Defense

A significant portion of the budget goes to the Ministry of Defense, in line with BiH’s NATO Partnership for Peace commitments. The exact allocation for defense has yet to be confirmed, but historically, it has constituted a significant portion of BiH’s budget.

European Integration and Reforms Significant funds have been directed towards integration into the European Union, including fulfilling obligations under the Stabilization and Association Agreement (SAA). These allocations aim to facilitate BiH’s alignment with EU standards

Social Sectors

Investments in health, education, and social welfare are critical, although insufficient compared to requirements. Federation budget prioritizes healthcare reforms and poverty reduction efforts

Debt service

External debt service is a major budget item, amounting to significant resources, with BiH’s debt structure growing under pressure from international commitments.

Challenges

Political instability

The budget process faces delays, often due to political disagreements, particularly regarding the distribution of funds between entities, which can lead to last-minute adjustments and fiscal uncertainty.

Corruption

The lack of transparent allocation, particularly in large infrastructure and EU-funded projects, remains a critical concern for the international community and domestic observers.

Economic growth

Despite reforms, Bosnia’s economy continues to face stagnation, with unemployment rates remaining high. Budget does not sufficiently address long-term economic diversification

Unsustainable distribution of funds Failure to align the distribution of funds with needs across the country, especially across entities, could exacerbate regional disparities

Debt support

The heavy reliance on debt to finance government operations risks placing long-term strain on the country’s finances, especially as external debt service increases.

This budget underscores the urgent need for political consensus and stronger economic reforms to ensure that Bosnia and Herzegovina can move closer to its European integration goals while addressing domestic economic challenges.

For more detailed figures and an analysis of the 2025 budget, the process and final allocations will become clearer once the budget is officially adopted.

Montenegro’s 2025 budget is centered around strategic investments in infrastructure, health and education, but it also faces significant economic and fiscal challenges. The overall budget is set at 2.2 billion euros, with a strong focus on capital projects and essential public services.

Key allocations

Infrastructure

The capital budget is notably high at 280 million euros, with major investments allocated to infrastructure projects such as the Bar-Boljare highway, road improvements and the development of transport networks. This focus is in line with the government’s goal to increase connectivity within Montenegro and boost its economy through tourism and trade

Defense and security

Defense spending remains a priority due to Montenegro’s NATO membership. Specific figures are not detailed, but the defense budget is focused on meeting NATO requirements and strengthening regional security

Healthcare

Healthcare is another important area of ​​focus, with investments in the construction of hospitals and medical centers throughout the country. The government plans to allocate funds for the construction of new hospitals in Bijelo Polje and Pljevlja, as well as an advanced PET-CT center and university clinical centers.

Education

Significant investments are being made in educational infrastructure, especially in improving schools and universities. This includes expanding capacities and modernizing facilities to improve the quality of education and address regional disparities

Social Welfare

Allocations for social welfare focus on pension reforms and improving the social safety net. The government aims to strengthen poverty reduction programs, although some critics argue that these programs remain underfunded compared to the needs of vulnerable populations.

Challenges and Criticism

Public Debt and Fiscal Sustainability

Montenegro faces increasing fiscal pressures, with public debt expected to exceed 60% of GDP by 2026. The country’s debt service obligations are set to escalate, with significant repayments expected in 2025. This strains fiscal space and raises concerns about long-term sustainability.

High public spending

High public spending, particularly on infrastructure projects, while necessary for growth, is a significant challenge. Critics argue that the government should prioritize fiscal consolidation to avoid overreliance on external financing and manage debt levels.

Economic slowdown

Although the country saw tourism- and consumption-led economic growth in 2023, forecasts suggest a slowdown between 2024-2026. The decline in tourism growth and the potential increase in imports could limit GDP growth, challenging the government’s ability to maintain fiscal stability.

State-Owned Enterprises (SOEs)

The management of state-owned enterprises remains a critical issue, with many SOEs continuing to burden the national budget. Critics argue that improving the governance and efficiency of these enterprises is essential to reducing their fiscal impact.

For more detailed figures and an analysis of the 2025 budget, the process and final allocations will become clearer once the budget is officially adopted.

Montenegro’s 2025 budget underlines its commitment to developing infrastructure and essential public services, but it also faces significant challenges related to debt management, slowing economic growth, and public spending. The success of this budget will depend on the government’s ability to manage fiscal discipline, reduce its reliance on debt, and ensure the efficient implementation of its ambitious capital projects. Furthermore, addressing governance issues in state-owned enterprises will be critical to long-term fiscal health and sustainability.