The aim of this paper is to examine the impact of Gross Domestic Product (GDP) growth on the merchandise trade balance (MTB) in Western Balkan countries (Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia). In general, an increase in domestic production leads to higher employment, which in turn raises disposable income for purchasing both domestic and foreign products. The rise in import activities, coupled with limited export capacities, results in an MTB deficit and, consequently, a current account deficit in these countries, negatively affecting external (balance of payments) equilibrium. The relationship between GDP and MTB is analyzed using the Pooled Mean Group (PMG) model over the period 2014Q1–2024Q3. The research findings indicate a statistically significant long-term negative relationship between GDP and MTB for all observed economies, confirming that GDP growth deepens the MTB deficit. In the short run, the relationship between the examined variables is also negative, but with heterogeneity across countries. A statistically significant short-term negative impact is identified in Bosnia and Herzegovina, Montenegro, and Serbia, while in Albania and North Macedonia, the short-term relationship is not statistically significant. To mitigate the chronic MTB imbalance, economic policymakers in the Western Balkans should focus on strengthening the competitiveness of national economies through technological advancements and innovation, fostering domestic production, expanding export capacities, and ultimately reducing import dependency

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