Kosovo’s GDP rose by 3.9% y/y in Q1, to nearly €1.96bn, after it posted increasingly stronger growth rates since Q2 last year and an overall 2.7%b economic growth last year.

Kosovo is set to be the fastest-growing economy this year among the Southeast European countries, with projected growth of 3.7%, rising to 4.4% in 2024, according to the World Bank’s Global Economic Prospects published in June. However, the projection was drafted before the recent events in northern Kosovo that prompted concerns among foreign investors.

The 3.9% y/y growth in Q1 was the result of a 9.25% y/y advance in manufacturing, 14.9% advance in the IT&C sector and 10.3% stronger activity in the B2B services (professional, administrative, support).

On the GDP utilisation side, gross capital formation increased by 1% y/y and the final consumption of households and NPISH by 0.87% y/y.

The escalation of tensions in northern Kosovo may put on hold a number of investment projects with a direct impact on the economic growth this year and in the coming years.

The German-Kosovo Economic Chamber (KDWV) warned on June 15 that the political crisis in Kosovo due to the tense situation in the Serb-majority north of the country might prompt German companies to withdraw their current or planned investments.

“The members of KDWV are concerned that German companies may give up their investments in Kosovo, or stop existing activities," the declaration issued by the association reads, calling for a de-escalation of tensions and a sustainable business environment.

"News of political instability hurts the confidence of German customers and investors significantly. This has a negative impact on German-Kosovo economic relations and causes damage to Kosovo as a location for investment and business,” according to the statement published on the KDWV website.