Economic growth in Kosovo is expected to remain resilient at 3.8% in 2025-26, even as overall expansion in the Western Balkans moderates to 3.4% amid global uncertainty and weaker external demand, the World Bank said on Friday.
The Western Balkan economies – comprising Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – were buoyed by strong private consumption and higher remittance inflows in 2024, helping stabilize growth at 3.9%. However, a slowdown is anticipated as trade barriers rise and European Union demand weakens.
In its latest Economic Update for Europe and Central Asia, the World Bank forecast that regional growth overall would slow to 2.5% in 2025-26, compared to 3.6% in 2024. Central Europe’s growth is seen slightly improving to 2.7%, while Russia’s economy is expected to slow sharply to 1.3%.
“In the face of global uncertainty, geoeconomic fragmentation and weaker expansion among key trading partners, sustaining growth has become more challenging,” said Antonella Bassani, World Bank Vice President for Europe and Central Asia.
The report noted that inflationary pressures have re-emerged across the region, driven by higher food and services prices. Inflation rose to 5% year-on-year by February 2025, up from 3.6% in mid-2024, prompting several central banks to tighten monetary policy.
Private Sector Reforms Seen as Crucial
To achieve stronger and more sustainable growth, the World Bank stressed the need for structural reforms, especially in middle-income economies such as those in the Western Balkans.
“Innovation and experimentation in business are essential for boosting productivity and a prerequisite for achieving and sustaining high-income status,” said Ivailo Izvorski, World Bank Chief Economist for Europe and Central Asia.
The report urged governments to prioritize investment in innovation, support young and dynamic companies, deepen financial markets, and boost research and development (R&D). Access to long-term financing and venture capital remains limited across much of the region, hindering the emergence of high-growth firms.
The World Bank emphasized the importance of strengthening competition, reducing the dominance of state-owned enterprises, and encouraging technology adoption among domestic firms. Investing in human capital and skills development was also identified as critical.
Country Outlooks
In the Western Balkans, individual countries are expected to record the following growth rates:
Kosovo: Growth is projected to remain steady at 3.8% in both 2025 and 2026.
Albania: Growth is expected to slow to 3.2% in 2025 and 3.1% in 2026.
Bosnia and Herzegovina: Growth seen at 2.7% in 2025 and 3.1% in 2026.
Montenegro: Growth forecast at 3.0% in 2025 and 2.9% in 2026.
North Macedonia: Growth expected to ease to 2.6% in 2025 before slightly picking up to 2.7% in 2026.
Serbia: Growth seen at 3.5% in 2025 and 3.9% in 2026.
Elsewhere, Central Asia is expected to remain the fastest-growing subregion, despite a projected slowdown to 4.7% in 2025-26. Türkiye’s growth is forecast to improve modestly to 3.3%, while Ukraine’s economy is likely to slow to 2.0% in 2025.
The World Bank said middle-income economies must leverage technology, expertise and capital to drive productivity gains and reach high-income status over the longer term.
