BB for Kosovo: Economic growth 3.2% in 2025

In the World Bank's report on the Western Balkans, published on April 28, 2025, notes that economic growth in the Western Balkans remains stable in the face of global uncertainty.

Economic growth in the Western Balkans is projected to slow at a moderate pace in 2025, due to lower external demand, as well as economic uncertainty created as a result of the changes taking place in global trade policies that can affect the trust of businesses and consumers, says the World Bank's Economic Rule Report for the Western Balkans.

The World Bank predicts that the common economic growth rate for Albania, Bosnia and Herzegovina, Kosovo, Montenegro, Northern Macedonia and Serbia will reach 3.2% in 2025, which represents a review of 0.5 percentage points less than the previous forecast. The increase is projected to accelerate to 3.5% in 2026.

“Low inflation and wage growth support consumption, while public investments are growing. On the other hand, we are seeing increased internal uncertainty in some of the Western Balkan economies. Slowing down economic activity in the European Union and growing uncertainty in global trade can also negatively affect the region's economic growth perspective,” says Xiaoqing Yu, World Bank Director for the Western Balkans.

Uncertainty in global trade is likely to affect the Western Balkans, largely as a result of slowing economic activity in the euro area. This slowdown could reduce the trade in goods and services, as well as investments and remittances.

The World Bank's report on the Western Balkans suggests some strategies for maintaining economic stability in periods of uncertainty, including diversification of growth resources and upgrading the agenda of structural reforms. The recommended measures include eliminating barriers to the labour market, strengthening regional economic integration, and improving governance and competition.

Albania has marked sustainable economic growth in 2024, with an increase of 3.9%, supported mainly by private consumption sectors, tourism and the construction sector. This positive performance has also come due to lowering inflationary pressures, while rising wages and job creation have helped reduce poverty by 1.7 percentage points, bringing the poverty level to 17.3%.

“Albania is an open economy, exploiting its proximity to the EU for exports, investments and remittances. The increase has been 3% annually over 10 years, yet Albania's per capita income remains one-third of the EU average (real American dollars in 2021). Despite structural challenges, the economy has shown resistance to the crises of 2019-2022, marking an average of 4.2 per cent year-on-year growth in 2022-2024, supported by increased trade with the EU, a strong tourism sector and hydro-power production, which meets up to 90 per cent of the energy demand in normal years. Structural challenges restricting long-term growth and revenue convergence include migration abroad, an aging population, poor labour force capabilities, and fiscal pressures from weather-related risks. Education of these challenges requires increasing additional government revenues and increasing spending efficiency, along with accelerating harmonised reforms with the EU to increase productivity, business environment and market integration. In general, poverty dropped by 1.7 percentage points, reaching 17.3 percent. In 2024, inflation was halved by 2023, an average of 2.2 percent, mainly because of the lower pressures promoted by import”, the report says.

The World Bank predicts Albania's economy growth will be moderated to 2025, with a projected growth of 3.2%, while inflation is expected to reach 3%.

The economic growth is expected to be moderated to 3.2 per cent in 2025 and 3.1 per cent in the medium term, amid the uncertainty of global trade policies and the emerging global perspective. Poverty is projected to drop to 16 per cent. Inflation is expected to increase and reach the target of 3 per cent and fluctuate around that level in the medium term. This trajectory will be shaped by continued internal pressures, including wage hikes, as well as interrupted supply chains driven by changes in trade policy”, the report said.

However, the report also highlights some important challenges for Albania, such as global uncertainty and geopolitical tensions, which could affect the country's economic perspective. Moreover, dependence on external demand and the need to proceed with structural reforms are some of the key factors that can shape Albania's future economic developments.

For Albania, the World Bank recommends accelerating reforms related to integration into the European Union and improving the business environment, increasing productivity and integration of markets. These steps are essential to enable sustainable long-term growth and to meet development goals.

“Risks for the prospect include high geopolitical tensions and further uncertainty about global trade and economic policies. These factors may further influence short-term growth in the EU, which remains Albania's main economic partner. Effective implementation of the EU's growth agenda and strong revenues from tourism represent positive aspects of uncertainty.”, reportedly in the report./Periscopi/