Economic Monitor Kosovo
The Iran conflict is expected to significantly affect Kosovo’s economy in 2026 by driving up oil prices, increasing import costs by 1.1% of GDP, slowing growth to 3.3%, and raising inflation to 5.9%—the largest forecast revisions in the region. Despite these shocks, growth will continue to be supported by strong private consumption, while remittances and FDI are expected to remain resilient. The current account deficit and budget deficit are projected to widen, although these changes are driven mainly by strong domestic demand and higher social spending rather than the conflict itself.
WA 11 | June 2026
Macroeconomic Analyses and Forecasting
Overview
- Iran conflict leads to higher oil prices: sizable additional import costs of 1.1% of GDP for KOS
- Economic growth revised downward by 0.5 pp due to Iran conflict, one of the largest revision in the region; current forecast: 3.3%
- Growth mainly led by strong private consumption, on the back of rising wages and social transfers
- Iran conflict leads to higher inflation; forecast for 2026 revised up from 3.1% to 5.9%; strongest revision in the region
- Current account deficit forecast to increase to 10.5% of GDP, as strong private consumption fuels goods imports; no significant impact of Iran conflict
- But: conflict implies negative terms-of-trade shock; higher import prices, unchanged export prices
- Remittances forecast to remain at around 17% of GDP, no significant effect of Iran conflict
- FDI inflows expected to be resilient too, forecast to 9% of GDP; small negative impact of conflict
- Budget deficit expected to rise significantly to 1.6% of GDP: mostly higher social spending, almost no impact of Iran conflict
- Strong effect of Iran conflict on economic growth and inflation in 2026
