The International Monetary Fund (IMF) has warned that Kosovo’s prolonged political stalemate in 2025 negatively affected the country’s economic growth and contributed to a rise in inflation, following the mission’s visit to Pristina earlier this month.
In a statement, the IMF noted that while the economy has remained resilient, growth slowed, inflation accelerated, and external account deficits widened. The Fund highlighted that political gridlock delayed the implementation of key reforms under the EU Growth Plan and constrained access to external financing.
“Growth slowed to 3.5 percent year-on-year by the third quarter of 2025, down from 4.75 percent a year earlier, as private consumption and investment weakened due to slower credit growth and stagnant real income,” the report said.
Rising imports, particularly of energy products, worsened Kosovo’s trade balance, pushing the current account deficit to 9.6 percent of GDP, up from 8.4 percent in 2024. Inflation rose sharply to 5.25 percent by December, primarily driven by higher food prices. Formal employment continued to grow, but real wages stagnated and unemployment remained high at 10 percent, with female labor force participation persistently low.
The IMF projected 3.8 percent economic growth in 2026, emphasizing the need for recalibrated fiscal policies to reduce fiscal stimulus and address macroeconomic imbalances. The statement recommended anchoring medium-term fiscal policy in a rules-based framework to balance stability and development objectives while building fiscal buffers.
“The financial sector remains sound, but rapid credit growth in recent years requires close monitoring of risks. Further structural reforms under the EU Growth Plan are expected to enhance resilience and unlock substantial external financing over the medium term,” the Fund concluded.
According to preliminary IMF analysis, Kosovo’s real GDP growth in 2025 was 3.4 percent, with a forecast of 3.8 percent for 2026.
