Kosovo Economic Outlook
After slowing in Q2 last year, annual GDP growth accelerated in Q3 due to stronger private and public spending and a weaker contraction in investment, which more than offset slower export growth. Turning to Q4, growth likely deteriorated. Consumer loans plunged into an annual contraction during the quarter. Moreover, electricity consumption continued to contract in the same period. Furthermore, remittances growth slowed and inflation remained in double digits in the quarter, boding poorly for private consumption. In politics, under EU supervision, Kosovo and Serbia tentatively agreed to normalize relations in late February. This generated protests in Belgrade; Kosovo is considered by some as central to the Serb nation as it houses the Serbian Orthodox faith’s main churches. That said, a final deal is yet to be signed. Further talks on its implementation are scheduled for 18 March.
In January, harmonized inflation remained stable at December’s 12.1%. Inflation should more than halve this year and fall into single-digit territory on moderating commodity prices and a stronger base effect.