Kosovo Economic Outlook
After picking up in Q4, activity was likely upbeat in Q1 too. In January–February, energy consumption contracted at a significantly slower pace than in Q4. Furthermore, consumer loans and exports rebounded in annual terms in Q1, while remittance growth accelerated. Moreover, inflation decelerated over the same period, reducing pressure on real incomes and private consumption. In politics, the diplomatic crisis with Serbia worsened over the past month. In early May, Prime Minister Kurti dismissed the team—headed by a Serbian MP—behind plans for a community of Serb-majority municipalities in the north of the country, boding poorly for normalizing relations with Serbia. The dismissal came shortly after an EU-brokered meeting in Brussels with Serbian President Vucic. Meanwhile, in April, the EU Parliament approved visa-free travel for Kosovan citizens from 2024 onwards.
Kosovo Inflation
In March, harmonized inflation decelerated to 7.6% (February: 10.9%). Price pressures should cool this year on a high base effect and as private demand slows. That said, volatile commodity prices are an upside risk, with European natural gas prices in particular focus.
This chart displays Economic Growth (GDP, annual variation in %) for Kosovo from 2012 to 2021.