The World Bank expects Kosovo’s economy to grow by 3.6 percent in 2026, followed by growth of 3.8 percent in 2027 and 3.9 percent in 2028. Inflation is projected to reach 6 percent this year before declining to 3.7 percent in 2027 and 3.2 percent in 2028.

In its Macro Poverty Outlook – October 2026 report, the World Bank warns that political uncertainty and developments in the Middle East pose risks to Kosovo’s economic outlook.

The institution estimates that economic growth slowed to 3.6 percent in 2025, down from 4.6 percent in 2024. However, economic activity expanded by 5.4 percent in the first quarter of 2026, supported by net exports and government consumption.

Merchandise exports increased by 19 percent in the first half of 2026 compared with the same period last year. The World Bank attributes this growth partly to higher global nickel prices and increased exports of previously stockpiled metals.

Services exports also rose by 13 percent year-on-year, driven mainly by travel, information and communication technology, and other business services.

Consumer price inflation averaged 6.5 percent in the first half of 2026. However, food inflation declined from 8 percent in February to 2.7 percent in July.

Administrative data show that real wages increased by 9 percent in the first half of the year compared with the same period in 2025.

Tax revenues rose by an average of 9 percent during the first seven months of 2026. Meanwhile, public spending increased by 19 percent year-on-year, driven by higher direct transfers, including pensions and social benefits, as well as the payment of the 13th salary to public sector employees in March.

Although the fiscal deficit remains within the legal limit of 2 percent of gross domestic product (GDP), the World Bank notes that inefficiencies in public spending persist.

Political Uncertainty and Inflation Pose Risks

The World Bank warns that political uncertainty could delay structural reforms, undermine investor confidence and jeopardize access to external financing.

Higher fuel prices and the potential impact of the conflict in the Middle East on consumer prices could also place additional pressure on economic activity.

Consumption is expected to remain one of the main drivers of economic growth, although geopolitical developments could limit the contribution of external demand.

Poverty Expected to Decline Gradually

The World Bank projects that Kosovo’s poverty rate, measured using the threshold of $8.30 per day in 2021 purchasing power parity, will decline from 22.2 percent in 2025 to 22 percent in 2026. The rate is expected to fall further to 20.2 percent by 2028.

However, the institution warns that rising food prices remain a significant risk for the poorest households. Food accounts for 64 percent of consumption among the 10 percent of the population with the lowest incomes.

The report highlights the need for better-targeted social assistance programs, greater labor market participation, improved professional skills and higher-quality investment in infrastructure and human capital.

The World Bank concludes that accelerating structural reforms, improving the business environment and increasing productivity will be important for attracting investment and bringing Kosovo closer to the European Union.