Economic Monitor Kosovo
Following strong, tourism-driven service exports and buffering effects of state subsidies and remittances on private consumption, Kosovo’s economic grew at a rate of 3.5% in 2022. Negative influences such as low public investment activities and a negative terms of trade shock driven by surging prices for imported commodities could thus be more than outbalanced. For 2023, economic growth is forecasted to be even higher with a predicted rate of 3.8%, however, driven by very different factors than in 2022 – especially a predicted surge in public consumption and investment after stalling in 2022 is predicted to play a key role to this end. In addition, inflation is expected to ease over the year with sharp decreases already observable in the first months of 2023.
Overview
- 2022: economic growth at 3.5% following strong, tourism-driven service exports and buffering effect of state subsidies and remittances on private consumption
- These factors outbalanced low public investment and negative terms of trade shock driven by surging prices for imported commodities
- Economic growth expected to be higher in 2023 with a predicted rate of 3.8%
- Drivers: surge in public consumption and investment after stalling in 2022
- Ease in inflation observable: after surge in 2022 (average rate: 11.6%), inflation rates are decreasing sharply over the first months of 2023 (Jul-23: 2.8% yoy)
- Current account deficit lower, but remains significant (estimated at 7.3% of GDP in 2023): stronger service exports and remittances on the one hand, increasing goods imports on the other hand
Special issues
- Tourism. Key role for Kosovo’s economic development
- Foreign direct investment. Record inflows in 2022 and increasing diversification
- Economic zones. First steps towards more effective zones
- National Energy and Climate Plan. Shaping Kosovo‘s future energy and climate policy
- Banking sector. Important and resilient role for Kosovo’s economy
