Kosovo Economic Outlook
After picking up in Q4 last year, annual growth likely accelerated again in Q1. Over the quarter, inflation decelerated, remittances growth picked up, consumer loans rebounded and energy consumption contracted at a slower pace. Turning to Q2, the early signs are upbeat. In April, inflation continued to decelerate, reaching the lowest rate since October 2021, while growth in new consumer loans was above the Q1 average. In politics, tensions with Serbia have continued to worsen. In late May, the Kosovan authorities dispatched police to ensure that ethnic Albanian mayors took their offices after April’s disputed election. This culminated in ethnic Serbs clashing with police and NATO peacekeepers. The government’s move has been criticized by the U.S., leading Washington to threaten sanctions against Kosovo.
In April, harmonized inflation decelerated to 6.3% (March: 7.6%). Inflation will slow this year due to cooling private demand and a high base effect. That said, volatile commodity prices, particularly European natural gas prices, are an upside risk. The conflict with Serbia is a factor to watch.