The World Bank’s report on the Balkan region also presented data on the economy of Kosovo. The report states that inflationary pressures have returned in 2025, driven by higher energy and food prices, thus reducing real disposable incomes.
in report It is said that after a growth of 4.4 percent in 2024, Kosovo’s economy slowed to 3.6 percent in the first quarter of 2025, due to reduced household consumption and weakening external demand.
It further states that prolonged delays in forming a new government could negatively impact investment and slow progress on structural reforms.
The report also said that real wages rose by 10.3 percent in 2024, supported by an increase in the minimum wage, but formal employment grew only modestly, averaging 1.4 percent in the first half of 2025.
Investment also strengthened, with gross capital formation increasing by 13.6 percent, boosting activity in construction and manufacturing, while financial services expanded alongside rising demand.
Strong domestic demand also fueled growth in imports, which rose 14.5 percent in the first five months of the year, outpacing a 12 percent increase in exports.
“Remittances from the diaspora and foreign direct investment provided only limited support, increasing by 3.5 percent and 3.6 percent respectively through May,” it further states.
High domestic demand, including increased government consumption, along with rising prices of food, beverages, electricity, and services, fueled inflation in the first half of 2025.
“Consumer inflation reached 4.3 percent in July 2025, bringing the average for the January-July period to 3 percent. Core inflation also increased during this period, reaching an average of 1.5 percent by July 2025,” the WB report said.
Fiscal and financial sector risks remain limited, providing a stable backdrop for the economy, despite the slowdown in growth.
“The fiscal position continues to be supported by strong taxes on current spending, together with higher public investment execution, which is expected to keep the fiscal deficit around 1 percent of GDP between 2026 and 2027.”
Part of the World Bank report also deals with perspective and uncertainty.
“Delays in forming a new government could slow down the implementation of the structural reform agenda and delay access to external financing, including the new EU Growth Plan,” it further states.
The report emphasizes that continued emigration is an obstacle to growth, while untapped domestic potential, especially of women, can be unlocked by increasing women’s participation in the workforce. /Telegraph/