Assessing Sustainable Competitiveness of Balkan Economies Using the Entropy-Based PROMETHEE Method

Over the last two decades, Balkan countries have faced a multitude of challenges, encompassing economic recovery, structural weaknesses, socio-economic disparities, and environmental sustainability. Intense global competitive pressures compel these economies to strive for a stronger competitive position, a struggle exacerbated after the pandemic crisis, which significantly weakened their development capabilities and resulted in social and environmental problems due to an exclusive focus on economic performance. While this strategy may yield short-term effects, it ultimately undermines long-term competitiveness by neglecting environmental and social dimensions of development. Consequently, the concept of sustainable competitiveness has gained prominence, necessitating a comprehensive understanding of a country's strengths and weaknesses across various dimensions beyond traditional economic indicators. Recognizing the importance of measuring sustainable competitiveness for policymakers globally, the Global Sustainable Competitiveness Index (GSCI) has been developed. The index evaluates the performance, trends, and growth prospects of countries by analyzing a variety of quantitative indicators categorized into five pillars of national development, including natural capital, resource efficiency, social capital, intellectual and innovation capital, and governance performance. However, considering variations in number of indicators, pillars (in 2022, new pillar is introduced), and analyzed countries over time, along with some methodological constraints mentioned in the current literature, such as uniform weights for all pillars and aggregation procedures, a comparative analysis of Balkan countries’ sustainable competitiveness is conducted using the Entropy-based PROMETHEE method. The Entropy approach, an objective weighting is employed to calculate the relative importance of each pillar, assigning higher weights to criteria with greater differences across countries and lower weights to those with similar states among countries. PROMETHEE method, as one of the most commonly used Multi-Criteria Decision Making (MCDM) methods, is used for ranking countries, enabling a comparative analysis of observed countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Montenegro, North Macedonia, Romania, and Serbia). Given the paramount importance of ensuring sustainable competitiveness, particularly in the aftermath of the COVID-19 pandemic, the aim of this paper is to conduct a comparative analysis of Balkan economies in 2020 and 2023. The objective is to derive appropriate policy implications based on changes in rankings and graphical representations of the advantages and disadvantages of each country derived by the applied methodology. The results reveal significant shifts in rankings between 2020 and 2023, indicating that economic measures implemented for recovery from the pandemic crisis have significantly impacted sustainable competitiveness in these countries. While Croatia retained its first position in 2023 as it did in 2020, other countries experienced substantial changes in their positions, accompanied by alterations in their advantages and disadvantages compared to 2020. Analyzing these differences provides a deep and comprehensive insight into the sustainable competitiveness of these economies, forming the basis for developing policy implications.