IMF: Political stalemate slows economic growth in Kosovo

The International Monetary Fund has estimated that political deadlock in Kosovo in 2025 has affected economic growth.

In the closing statement from the visit to Kosovo, the IMF Mission has declared that the economy has shown stability, but that growth has slowed, while inflation has accelerated. Although the prospect, according to the IMF, is positive, some negative risks still remain.

“As the economy has shown stability in the face of prolonged political stalemate, it is estimated that growth has slowed in 2025, while inflation has accelerated and the external current account deficit has expanded. The political stalemate has limited the advancement of implementing reform agenda under the EU Growth Plan and access to external financing”.

The IMF has said it has also had external account deficits, while noting that even real wage hikes have been imposed.

The protracted political stalemate has had an impact on 2025 economic growth. The increase has slowed to 31502 percent (year above year) by the end of the third quarter of 2025, down from 43504 percent a year ago, as private consumption and investments weakened in terms of slow credit and increased real income. The increase in imports of goods, especially of products in the energy sector, has led to a deterioration of the trade balance, expanding the external current account deficit to 9.6 percent of BPV, from 8.4 percent in 2024.

This external impact of growth is partly compensated for increased government consumption and public investment, with support for improving the execution of the budget. Inflation accelerated to 51504 percent (year above year) to December from 1.1 percent a year ago, driven by rising food prices. Formal employment has continued to mark growth, although real wage increases have remained stable, while unemployment has remained high (10 per cent). This, along with continued low labor force participation, especially that of women, is the indicator of capacities still untapped on the labour market, the statement said.

In the chart shown in this statement, it has been said that according to preliminary analysis the actual growth of Bruto Product of 2025 was 3.4 percent, while for 2026 it forecasts 3.8 percent growth.

It has recommended recalculation of fiscal policy for 2026 to lower fiscal impulses and address macroeconomic imbalances. Over the medium term, fiscal policy must be anchored in a rule-based framework, balancing macroeconomic stability and developmental goals, while fiscal reserves are being built. The financial sector is in good shape, but high credit growth in recent years requires close monitoring of financial sector risks. Based on recent reforms, further efforts are needed to increase systemic resistance, along with strengthening surveillance. Structural reforms, based on the EU Growth Plan, will generate benefits for growth and unlock considerable external financial support in the medium-term”.

The IMF mission officially visited Kosovo from February 3rd to February 13th.

The IMF's Kosovo mission chief, David Legoglobel, had held a press conference with Finance Minister Iron Murati and Kosovo Central Bank Governor Ahmet Ismaili. There Ismaili said during 2025, Kosovo's economy witnessed high stability and growth has continued at a positive pace.

He estimated that Kosovo's economy continues to present positive stability and performance, following a sustainable growth trajectory, despite challenges and risks that require continued attention. The financial sector, especially that banking, remains stable, well capitalised, with high liquidity and low levels of non-aligned loans.

In conclusion, the CEC Governor stressed that progress achieved in financial stability, supervision, the payment system, governance, financial integrity and harmonisation with EU standards testifies to the BEC's commitment to building a stable, transparent and modern financial system in the function of sustainable economic growth and prosperity of the country.

In 2025, Kosovo was without institutions because of blockades in the Assembly. The February 2025 elections did not produce the new Parliament government, nor did it make a decision because of its drives until the institution.