Kosovo

Kosovo is a young country — young in the age of its population, one of the youngest in an aging Europe, and young in its history as a state. It is a parliamentary republic that declared independence on February 17, 2008, and is recognized as an independent country by more than 100 United Nations states. It is a potential candidate for European Union (EU) membership and its Stabilization Association Agreement with the EU has been in force since April 2016, laying the legal ground for closer alignment with EU standards.

Over the past decade, Kosovo's per capita GDP has followed a significant increase, from around $3,500 in 2015 and now exceeding $6,000. The country moved up to upper-middle-income status in 2018, and it exited the World Bank Group's list of "fragile" countries in 2025.

Kosovo has also earned a reputation for prudent macro-fiscal management, sustained growth, and low deficit and debt levels. Yet the story is not finished. Kosovo's per capita income remains only about 15% of the EU average, and at current growth rates, closing that gap would take decades. While on a firm downward path, poverty level remains one of the highest in the Western Balkans region. There is still a great deal of work ahead, and the World Bank is committed to continuing that journey with Kosovo.

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Kosovo is a small, upper-middle-income economy whose growth over the past decade has been driven primarily by consumption, financed by remittances and credit, rather than by productivity gains or export competitiveness. In the decade before the pandemic, GDP grew by an average of more than 4% per year, translating into a significant increase in per capita income and a reduction in poverty, yet this progress entrenched a heavy reliance on imports and fueled the expansion of non-tradable sectors such as retail, construction, and real estate, at the expense of job-creating, export-oriented activities. The economy is dominated by services, with nascent but promising activity in manufacturing, and ICT offering pathways toward diversification. Labor market performance remains one of the weakest in the region: the employment rate stands at just 38.6%, women's inactivity rate is above 70%, and youth not in education, employment, or training (NEET) rates reach 31.4%, compounded by persistent emigration of younger and better-educated workers.

Following a moderation in growth to 3.6% in 2025, economic activity expanded by 4% in the second quarter of 2026, underpinned by stronger domestic demand, and buoyant services exports. Growth is expected to hold at 3.6% for 2026 and average around its potential of 3.8% over the medium term, as geopolitical headwinds constrain external demand and poverty continues to gradually decline. For the latest macroeconomic projections, see the World Bank's Kosovo Macro Poverty Outlook.

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Since independence, Kosovo has successfully built market institutions, strengthened infrastructure and human capital, maintained macroeconomic stability, and deepened its financial sector.

Kosovo’s young population, strategic location, widespread broadband coverage, use of the euro, access to the EU market, and commitment to European integration provide a strong foundation for greater participation in regional and European value chains. New activities, particularly information and communication technology and business services, are expanding exports and demonstrating the potential of a more diversified, knowledge-based economy.

Kosovo’s close ties with its diaspora remain a major development asset. Remittances, travel spending, investment, business networks, and knowledge transfers have supported consumption, reduced poverty, expanded services exports, and helped Kosovo attain upper-middle-income status. Diaspora connections have also opened access to European markets for digital services, manufacturing, and construction materials. However, the growth model now needs to evolve beyond consumption and real estate toward more productive domestic and foreign investment. Channeling capital into export-oriented sectors, innovation, and higher-value activities would help broaden the economic base, increase productivity, and generate higher-quality, better-paid jobs for Kosovo’s young people.

Realizing this potential requires tackling persistent structural constraints. Employment remains low, especially among women, while emigration and skills shortages limit the available workforce. Despite growth, value of exports of goods remains modest, and foreign direct investment is concentrated in real estate, offering limited productivity, technology, and knowledge spillovers. Firms often struggle to access finance. They face gaps in workforce skills, institutional uncertainty, and unreliable electricity. Dependence on aging coal-fired power plants also contributes to pollution, high emissions, and supply disruptions. Strengthening education and skills, improving governance and the business environment, expanding access to finance, modernizing energy systems, and supporting competitive export sectors will be essential for sustainable, inclusive, private sector-led growth.

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Since the end of the war in 1999, the World Bank has stood alongside Kosovo, first supporting reconstruction with a focus on rebuilding fiscal and financial institutions, restoring basic services such as education, health, and roads, as well as supporting private sector and community-level development. Over the past 25 years, the World Bank Group has engaged across nearly every sector of the economy, with a consistent focus on building strong institutions. Today, World Bank Group (WBG) engagement supports Kosovo to create better-quality jobs through a transition from a consumption-based economic model toward one driven by exports and competitiveness.

Kosovo became a full member of the WBG with representation on its governing Board and full access to financing and services in June 2009. In March 2025, Kosovo became an official donor to IDA with a paid-in contribution of $1.4 million.

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 are contributing to greater public service efficiency and quality, more formal private sector jobs, and increased environmental resilience. The CPF delivers a comprehensive World Bank Group program of lending operations and advisory services and analytics.

The support for greater public service efficiency and quality aims to improve human development outcomes as well as economic sustainability and resilience. The CPF program also supports 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.

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

Through investments and advisory services, IFC supports finance, energy security, real estate, digital financial services, and access to finance for micro, small, and medium enterprises, agribusinesses, farmers, rural communities, and women entrepreneurs. It also supports innovative sectors that create jobs and boost exports.

Preparations for Kosovo’s new multi-year CPF have begun, with the commencement of underpinning analytical work.

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