Kosovo, a parliamentary republic, declared independence on February 17, 2008, and is recognized as an independent country by more than 100 United Nations members. Kosovo is also a potential candidate for EU membership and signed a Stabilization Association Agreement with the EU that has been in force since April 2016.

The country has experienced steady economic progress since independence, with a nearly 50% increase in per-capita income. It has successfully transitioned away from a growth model based on high dependence on foreign aid inflows, outperforming peer countries of similar per-capita income. Growth has been supported by a steady expansion in consumption and investment, with a strong impetus from diaspora inflows, public investment in infrastructure, and financial deepening, amid a stable fiscal stance and an environment of low inflation.

Accelerating convergence with EU living standards will require a shift in Kosovo's growth model. The current trajectory, sustained by consumption, remittances, and non-tradable investment, has delivered stability but is unlikely to generate the productivity gains, job creation, and resilience needed to close the gap.

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After a three-year period of above 4% average growth, Kosovo’s economy slowed to 3.6% in 2025, as private consumption softened and imports picked up, while investment activity strengthens gradually. Higher wages and transfers, alongside robust credit growth, supported private consumption and poverty reduction. By end-2025, the contribution of trade to growth remained negative. Goods exports remained weak amid subdued external demand while services exports growth, dominated by travel, information and communication technology, and other business services, helped offset the impact of rising imports to a degree.

Remittances and FDI inflows continued to provide support covering more than half of the current account deficit. Rising energy and food prices contributed to higher inflation in 2025, continuing in 2026 as recent global developments worsen the outlook. The consumer price index reached 5.3 percent by December 2025, bringing annual inflation to 3.9%.

The medium-term outlook is expected to firm only modestly in 2026 due to a combination of domestic and external factors. The outlook is subject to downside risks and uncertainty. Price increases in energy and food following the conflict in the Middle East are expected to exacerbate an already difficult external demand sector, and the current account deficit is expected to hover above 9% on average, reflecting more expensive imports alongside a gradual rebound in exports. Growth is projected to continue to be driven by domestic demand, particularly consumption, as investment will be subject to costlier goods imports. Higher wages and credit growth, and elevated public and private transfers are expected to support private consumption and further reduce poverty, even as inflationary pressures are likely to persist throughout the period.

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The World Bank Group’s engagement in Kosovo dates back to 1999, when the institution joined international efforts to support Kosovo’s reconstruction and recovery and opened a field office in the country. Kosovo became a full member of the World Bank Group with representation on its governing Board and full access to financing and services in June 2009. Kosovo has been classified as an upper-middle-income country by the World Bank since 2018. In March 2025, Kosovo became an official donor to IDA with a paid-in contribution of $1.4 million.

The World Bank Group’s partnership with Kosovo has grown and changed over the years. Early on, the engagement centered around post-conflict reconstruction with a focus on normalization of life and the economy: this engagement supported the development of a recovery program that provided the basis for the mobilization of over $2 billion in donor assistance at three donor conferences co-chaired with the European Commission.

The World Bank engagement then transformed into a focus on institution-building and the deepening of the fundamentals for a market economy. Today, the World Bank is striving to strengthen the competitiveness of private sector led economy; improve the quality and efficiency of public services, in particular those aimed at building and protecting human capital; and strengthen fiscal and environmental resilience and sustainability. These efforts are crucial for helping drive job creation across the country.

The World Bank program in Kosovo currently includes 8 projects totaling $249.5 million. The most recent projects will support investments that facilitate trade and more efficient transport and support financial stability and inclusion.

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The Country Partnership Framework (CPF) for Kosovo for FY2023-2027 aims to support the country in accelerating its competitiveness for higher job creation and living standards. It outlines priorities for the World Bank Group’s engagement in the country, which will contribute to greater public service efficiency and quality, more formal private sector jobs, and increased environmental resilience. The CPF aims to deliver a comprehensive World Bank Group program of lending operations and advisory services and analytics.

The  support for greater public service efficiency and quality, outlined in the first pillar of the CPF, aims to improve human development outcomes as well as economic sustainability and resilience. The CPF program is also supporting the ongoing reforms in the business-enabling environment, access to credit, and financial market development. It is doing this by supporting innovative and green financing and land titling, with a focus on promoting the inclusion of women, youth, and marginalized groups. Another part of the CPF program focuses on the support for increased environmental resilience, which promotes Kosovo’s transition toward a future that safeguards the sustainability of economic growth and citizens’ quality of life.

Preparations for a new multi-year CPF for Kosovo are scheduled to start in the second half of 2026.

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