Kosovo 2015
Population, million
GDP, current US$ billion 6.4
GDP per capita, current US$
Life Expectancy at Birth, years 70.5

Kosovo is a parliamentary republic. It declared independence on February 17, 2008 and is recognized as an independent country by 109 out of 193 United Nations members and by 23 out of 28 EU members. Kosovo is a potential candidate for EU membership, and in recent years, it has accelerated its EU integration process.

The current governing coalition includes the two biggest political parties in the country— the Democratic Party of Kosovo (PDK) and the Democratic League of Kosovo (LDK)—that together control a majority of over two-thirds of seats in parliament, with parliamentary elections again scheduled for June 2018.

Although Kosovo’s economic growth has outperformed its neighbors and been largely inclusive, it has not been sufficient to reduce the high rates of unemployment; provide formal jobs, particularly for women and youth; or reverse the trend of large-scale outmigration. The current growth model relies heavily on remittances and aid. This dependency, together with Kosovo’s structural characteristics, put pressure on competitiveness and productivity, limiting job creation and business expansion.

Kosovo’s current growth strategy needs to be adapted through reforms related to governance, macroeconomic, structural, and social policies. Addressing the infrastructure bottleneck in energy and building up governance and the rule of law are top priority areas in aiming to fully reap the benefits of EU integration, unleashing productivity gains, and creating quality jobs and inclusion.

Last Updated: Oct 07, 2016


Number of projects 7
IDA net commitment $116.75 million

Since 1999, the World Bank has provided to Kosovo and/or managed roughly US$400 million through more than 30 operations, including trust funds. Since Kosovo joined the WBG as a full member only in June 2009, all previous Banksupported projects had been financed through grants from a variety of sources, principally the Bank’s net income, the Trust Fund for Kosovo, the Post-Conflict Fund, and the International Development Association (IDA).

As of September 20, 2016, the active lending portfolio amounted to US$116.7 million across seven projects in the areas of energy, education, public sector reform, cadaster, agriculture, health, and the financial sector.

The WBG’s program in Kosovo is anchored in its Country Partnership Strategy (CPS) FY2012–16. In support of Kosovo’s EU integration objective, the CPS has helped to enable the authorities to (i) accelerate broad-based economic growth and employment generation; and (ii) improve environmental management.

It has provided approximately US$25 million per annum. The WBG has now begun preparations for a new Country Strategy Framework for Kosovo for the period 2017–21 and recently conducted a Systematic Country Diagnostic (SCD) aimed at underpinning the upcoming Country Partnership Framework.

Key Engagement

Active World Bank–financed projects, designed to strengthen the business climate and improve competitiveness, include: the Financial Sector Strengthening and Market Infrastructure Project, the Public Sector Modernization Project, the Real Estate Cadastre and Registration Project, the Agriculture and Rural Development Project, the Energy Efficiency and Renewable Energy Project, the Kosovo Health Project, and the Education System Improvement Project.

Support to alleviate Kosovo’s energy constraints is one element of the Bank’s broader strategy to boost economic development as well as improve competitiveness and environmental management. Bank support is aimed at addressing Kosovo’s energy crisis, which involves seeking to balance energy security and energy affordability with efforts to minimize socio-environmental externalities in order to mitigate the adverse environmental, public health, and economic impacts on affected citizens.

The active portfolio includes an Energy Efficiency and Renewable Energy Project, which aims to reduce energy consumption and fossil fuel use in public buildings and to support Kosovo in enhancing the policy and regulatory environment for renewable energy and energy efficiency.

Three projects are in the pipeline for FY2017: the Water Security and Canal Protection Project, the Competitiveness and Jobs Project, and Additional Financing for the Agriculture and Rural Development Project.

Number of projects 7
Lending $116.75 million (IDA Loans)

Last Updated: Oct 07, 2016


Recent Economic Developments

Kosovo’s economy stayed on a steady growth path in the first half of 2016. Growth for 2015 was revised from 3.6% earlier to 3.9%, due to stronger than anticipated domestic demand. In the first quarter of 2016, growth continued at 3.8%, with investment and consumption each contributing 4.9 percentage points (p.p.).

The contribution of net exports was negative (-5.9 p.p.) because imports grew rapidly (-6.1 p.p.) and exports slowed (0.2 p.p.). The current account deficit (CAD) widened to 9.1% of GDP in 2015 because of the large repatriated profits of foreign invested companies and imports of investment goods.

The slowdown in China brought down the prices of base metals, Kosovo’s main commodity export, and slashed exports of goods in the first half of 2016 by 5.6%. Imports of goods went up by 8.3% in the first half of the year, driven by stronger domestic demand. On the other hand, by June, imports of services had plunged by 16.7% due to a decline in imports of telecommunications, transport, and travel services.

Foreign direct investment (FDI) fell by 36% in the first half of 2016. Real estate, rentals, and business activities continued to attract most of the FDI this year, followed by the financial sector.

The 2015 fiscal deficit was 2.1% of GDP. Fiscal performance was satisfactory in 2016, with a temporary surplus of about 0.6% of GDP by July. Measures introduced in the second half of 2015, including an increase in the VAT rate from 16 to 18% and improvements in tax collection, increased revenues by 0.8 p.p. of GDP. Collection efforts further contributed to a 12.8% y-o-y increase in revenues between January and July 2016, including a 15.8% increase in tax revenues.

The Stabilization and Association Agreement (SAA) with the EU, which went into effect in April 2016, had reduced customs revenues by €10 million by July. On the expenditure side, spending rose by 7.2% also by July. The unanticipated large number of war veteran beneficiaries in 2016 at 27,000 to date puts pressure on the budget. With full implementation of new benefits, the related fiscal envelope reached 2% of GDP.

Kosovo’s financial sector performed well in the first half of 2016. Excess liquidity in the banking sector pushed lending rates down to 7.0% (from 8.1% in July 2015), thus boosting private credit, which grew by 9.2% in July 2016 and fueled consumption. Nonperforming loans (NPLs) continued to decline, dropping from 6.2% of total loans in January to just 5.3% by June 2016.

Economic Outlook

Economic growth in Kosovo is expected to increase to 3.9% in 2017, supported by growing consumption and investment. Growth in 2017 and 2018 will be driven by both private consumption and private investment, with net exports continuing to make a negative contribution. The CAD is expected to widen to 11.4% in 2016 and 12.6% in 2017 as the trade deficit widens.

The recent launch of the SAA with the EU is expected to boost FDI in the medium term. The investment amendment to the fiscal rule opened up room for productive public investment in strategic sectors. However, some ongoing political issues, such as the border demarcation with Montenegro, are creating uncertainties that represent downside risks to the outlook.

Last Updated: Oct 07, 2016

Project Spotlight

Agriculture and Rural Development

The World Bank is supporting the Kosovo Government’s strategy to promote growth and competitiveness in the agriculture sector, with a view to overcoming identified bottlenecks that hold back sustainable rural development and aligning Kosovo’s rural sector with EU support and accession requirements.

The Bank has been supporting the country’s agriculture sector through the Agriculture and Rural Development Project, whose objective is to assist the Government in promoting competitiveness and growth in the livestock and horticulture subsectors over the next decade. Training is being provided to farmers, agroprocessors, municipal advisors, and national extension staff, as well as private advisors, to help farmers and agro-processors develop sound business plans for investment support under the project.

The project is a US$20.15 million IDA credit and has also received approximately US$11 million from the Government of Denmark. To date, the project has provided grants to roughly 650 beneficiaries for a variety of investments related to the construction of greenhouses, barns, and cow sheds; milk collection and storage facilities; the establishment of new orchards; the collection, sorting, and packaging of equipment for fruits and vegetables; and farm machinery.

With project support, medium- and large-scale processing companies are becoming economically viable and profitable as they increase investments in advanced technologies, production/productivity, and product quality. Smaller companies are also upgrading their infrastructure and product quality (though limited in range) to the standards necessary for a competitive market presence.

Through technical and investment support, the project is helping to improve the capacity of the Government to prepare and implement its national agricultural strategy and rural development grant program. 

Last Updated: Oct 07, 2016


Kosovo: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments