Economy of Kosovo

Kosovo is a developing country with an economy that functions on the principles of the free market, with a large private sector. Kosovo is an upper-middle income economy according to the World Bank, and is a member of the World Bank and the International Monetary Fund. Its official currency is the euro.

Kosovo has seen consistent economic growth since the end of the Kosovo War in 1999, with a positive growth rate in every year except 2020, during the COVID-19 pandemic. Its main trading partner is the European Union, with roughly 40% Kosovo's 2023 trade volume being done with the block, led by Germany, Italy and Greece. CEFTA countries make up another major part of Kosovo's trade partners, with Albania, North Macedonia, and Serbia being Kosovo's main regional trade partners. Other important trade partners include the United States, Turkey, Switzerland, and China.

Despite its high endowment with lignite, Kosovo is currently undergoing an energy transition, attempting to phase-out its aging lignite power plants and to replace them with wind power plants such as Bajgora and Kitka wind farms, and with solar parks. Kosovo's road network is relatively well developed, with the R6 and R7 motorways connecting the country to North Macedonia and Albania, respectively. The rail network is less developed, but investments are being made to modernize the train connections within the country.

Kosovo is home to many tech companies and is a net exporter of services, with service exports totalling $2.6 billion (28% of GDP) in 2022. The tourism sector is growing, with hiking and cultural tourism being main tourism activities. Peja, Prizren, and Pristina are some of the main tourist destinations, with Peja being close to the Accursed Mountains, a popular hiking destination.

One of the main limiting factors on the Kosovan economy is its disputed declaration of independence which is not recognised by its neighbor Serbia and large economies such as Russia, India, and China, which limits the country's ability to join international organisations such as the WTO. Another challenge is migration out of the country, with an estimated 700,000 citizens having emigrated between 1990 and 2023.

However, Kosovo maintains a low level of government debt, future liabilities, and a strong banking sector (despite remaining obstacles to using this for productive loans). The Kosovan diaspora accounts for a large portion of the economy and the inflow of capital to Kosovo through remittances, which contribute significantly to both household consumption as well as investment in businesses. In 2009, approximately a quarter of Kosovan businesses that were surveyed were established with the support of the diaspora and its capital.