Advancing Social Protection and Opportunities for Reform in the Western Balkans

The need to reform social protection systems across the Western Balkans has become more salient given the impacts of overlapping global crises such as the COVID-19 pandemic, Russia's invasion of Ukraine, and high inflation. Social protection-social assistance, social services, social insurance, and employment and labor market services and programs-helps the poorest and most vulnerable households cope with shocks, protect investments in human capital, and provide opportunities for people to get out of poverty.

Millions of people across the region remain exposed to a range of well-known risks, with shocks and new sources of vulnerability exacerbating the urgency of reform. The six countries of the Western Balkans are taking steps to improve their social protection systems to make them fairer, more sustainable, more effective and better able to respond to people's needs.

Social Protection Situational Analyses for Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia discuss the complexity of social protection systems across the Western Balkans, while a Western Balkan Summary Note provides a regional overview of common challenges and offers four main areas of reform to reduce poverty and vulnerability:

1. Establishing strong foundations for social protection systems to better respond to crises

Governments in the Western Balkans can improve their social protection systems by analyzing their delivery systems to identify gaps in outreach, intake, enrollment, and payments to improve efficiency and access for vulnerable populations. Developing a social registry is essential to identify beneficiaries quickly during crises and expand the coverage of social assistance support. However, governments should shift their mindset towards identifying households in need, rather than relying on static demographic characteristics, to ensure eligibility is not limited by strict categorical criteria. By prioritizing social protection reform, the countries of the Western Balkans can make great strides towards reducing poverty and promoting inclusive economic growth.

2. Expanding coverage and effectiveness of poverty-targeted programs to improve inclusion and support for vulnerable populations

In order to improve inclusion and support for vulnerable populations, there needs to be a serious commitment to poverty-targeting, which includes increasing spending on last-resort income support across the Western Balkans. Reforms to disability assessments and social services are also necessary, including a shift from a purely medical examination to determine disability to an evaluation of the interaction of functional impairments caused by a disease with the environment in which the person lives. To achieve a more effective and efficient delivery system, ongoing reform efforts should focus on building case management systems for integrated needs assessment and supporting referrals between services and cash programs, promoting capacity development at the local level, and expanding the provision of long-term care for the elderly.

3. Facilitating access to better employment opportunities and promoting labor market inclusion

Employment services in the Western Balkans are facing challenges in supporting workers through the changes brought on by the pandemic and ongoing global trends, such as increasing skill gaps and job automation. While there is considerable international support for employment service reforms, the list of outstanding reforms in the Western Balkans remains long, including better tailoring services to the needs of employers and jobseekers, increased capacity for employment counsellors, specialized support for vulnerable groups, and transparent monitoring and evaluation systems. Additionally, a disconnect between financing and service provision is highlighted by relatively high social security contributions and low coverage of unemployment benefits. A review of the unemployment benefit system is necessary across all countries, as benefits provided are not sufficient for those who are entitled, and many who need these benefits are not able to access them due to limited coverage for those in formal employment.

4. Ensuring the financial sustainability of social protection programs for long-term effectiveness

Social protection systems in the Western Balkans are facing challenges with financial sustainability and effectiveness in reaching the poor and vulnerable. Spending on pensions is high, but low productivity and employment rates as well as population aging and emigration, put the future sustainability of these systems at risk. Meanwhile, spending on poverty-reducing social assistance, social services, and employment support is low, leading to intergenerational poverty and dependence on government welfare. A comprehensive review of social protection policies is necessary, including prolonging the effective working age, means-testing social pensions, implementing voluntary saving plans, extending coverage to informal workers, promoting productivity and employment, and focusing on active aging. Reforming pensions alone will not solve these issues, and government funding must be balanced among competing demands.

Summary Note

Advancing Social Protection in the Western Balkans: Opportunities for Reform

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