Small and Medium Enterprises in the Western Balkans: Development, Challenges, and Prospects - Economicus

Dr. Agim NDREGJONI

Abstract
This study examines the development of small and medium enterprises (SMEs) in the Western Balkans, the challenges they encounter, and their prospects amid regional economic transformation. Using a systematic literature review of research published between 2018 and 2025, we focus on six countries: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia. Key findings indicate that SMEs form the economic backbone of the region, yet face persistent barriers including limited access to finance, complex taxation, institutional inefficiencies, and skills shortages. Recent insights suggest that streamlined tax systems and increased institutional trust positively influence SME growth. The paper concludes that policy reforms, particularly in regulatory simplification, financial access, digitalization, and governance, are essential to enhance the resilience and competitiveness of SMEs. These measures are critical not only for inclusive development but also for preparing the SME sector for integration into the European Union.

Keywords: SMEs, Western Balkans, entrepreneurship, taxation, institutional trust, economic development