Key Political Risks Facing the Western Balkans & Türkiye
Implications for International Investors

January 29, 2024
At the beginning of 2023, Aretera predicted that the three main challenges to stability in the Western Balkans would relate to Kosovo’s sovereignty (that is, the ability of Pristina institutions to excerpt control over Serb-dominated northern regions), Bosnia & Herzegovina’s territorial integrity (threatened by the secessionist policies and rhetoric of Republika Srpska leader, Milorad Dodik) and the heightened nationalism in Montenegro in what would be a crucial election year.

Over the course of last year, the first two issues escalated significantly and now present major challenges for regional stability going into 2024. On the other hand, Montenegro successfully emerged from its critical election cycle with minimal nationalist tensions and is looking towards 2024 as a year in which institutional reforms and EU accession take centre stage.

In terms of economic performance, following a slowdown in 2023, the Western Balkans are gearing up for a moderate growth acceleration in 2024, albeit lower than initially forecasted, as projected by the World Bank. This positive outlook is mostly attributed to the recovery within the European Union, the region's primary trade partner, coupled with lower inflation expected to encourage consumption. Although rates differ across the region, with tourism playing a major role for coastal countries, the Western Balkans markets are en route to returning to pre-pandemic levels. Nevertheless, the prospects for future investments remain dependent on systemic efforts to tackle issues such as corruption and inefficiency.

Overall, ethnic tensions, deeply ingrained corrupt practices, as well as political instability in some countries continue to shape the region’s business climate. Moving forward, companies operating in the region should closely monitor these developments, as they tend to pose challenges in terms of overall legal and economic certainty, especially as several countries are preparing for upcoming elections.

The Western Balkans is sluggishly progressing towards EU integration, and the European Commission has proposed a new $6 billion Reform and Growth Facility package for 2024-2027, depending on the fulfilment of a set of reforms. These will mainly be focused around respect for the rule of law, human rights standards and media freedom, as well as stricter transparency and anti-corruption mechanisms. Furthermore, the Open Balkan initiative, a form of political and economic cooperation between three member states, Serbia, Albania, and North Macedonia, has seen some progress in 2023 and early 2024. Two protocols signed in January aim to form a common market with free labor movement across the zone.

Elsewhere in the wider region, Türkiye will face a number of geopolitical risks this year, ranging from the neighbouring Israel-Hamas War and increasing instability in the Middle East to the fallout from a potential escalation in Russia’s war against Ukraine. Fixing the economy will top the country’s domestic political agenda, while Ankara is also headed for crucial local elections in the spring, via which President Recep Tayyip Erdoğan’s ruling Justice and Development Party (AKP) will aim to retake control over opposition-held larger cities, including Ankara and Istanbul.

These are the main regional takeaways from Aretera's Annual Forecast for 2024, in which we unpack the key political and geopolitical risks facing Central & Eastern Europe, the Western Balkans, Türkiye, Central Asia and the South Caucasus.

If you would like to receive a copy of the full report or schedule a discussion of our Annual Forecast, please contact:
Dominik Istrate, Research Director at