The Republic of Kosovo, Europe’s youngest country, has an emerging market economy and a population of 1.6 million. Kosovo’s GDP grew at 4.4 percent in 2024, a rate driven primarily by private consumption and exports. GDP growth is expected to remain steady in 2025 and is forecasted in the range of 3.8 to 4.0 percent, according to the International Monetary Fund (IMF). According to data published by the Kosovo Statistics Agency (KSA) on September 2025, real GDP growth for Q2 2025 reached 4.58 percent, surpassing IMF forecasts.

Kosovo has a small domestic market and limited but growing industrial production. Kosovo has nearly doubled the number of its trade partners in the last five years. According to Kosovo Customs, Kosovo’s main trade partners are the EU countries (approximately 43 percent of imports and 32 percent of exports) and its Western Balkans neighbors, with which Kosovo trades tariff-free under the terms of the Central European Free Trade Agreement (CEFTA). Fellow CEFTA countries (Albania, Bosnia and Herzegovina, Moldova, Montenegro, North Macedonia, and Serbia) are the source of approximately 16 percent of imports, and the destination for 40 percent of exports. Kosovo maintains a large trade deficit, with exports covering only about 13.9 percent of imports in 2025. The main import categories include:  mineral products (14 percent); machinery and electrical equipment (13.2 percent); prepared foods, beverages, and tobacco (13 percent); and plastic and rubber products (12.5 percent). 

For 2025, shipments from Kosovo towards the EU increased 1.2 percent, accounting for 34.2 percent of total exports. Kosovo’s economy benefits from its large diaspora population. In addition to remittances, which constituted nearly 12.8 percent of GDP in 2024, Kosovo’s economy is also boosted by diaspora tourism in the summer months. Kosovo recorded one of the highest trade deficits in its history in 2024. This is partly due to visa liberalization, as tourism abroad is accounted for as an import of services. Remittances, however, are largely geared toward consumption and very little goes towards investment.

Since independence, Kosovo has made significant economic progress, yet several challenges remain. Kosovo has a large informal economy, heavy reliance on remittances, and high unemployment rates, especially among women, youth, and ethnic minorities. Limited regional economic integration and ongoing tensions with neighboring Serbia serve as the main barriers to attracting foreign direct investments (FDI).

On August 1, 2025, the Government of Kosovo removed customs duties for goods originating from the United States of America. This unilateral decision by the Kosovan government aims to facilitate trade and deliver tangible benefits for both businesses and consumers in Kosovo. It also represents an important step in further strengthening commercial and economic relations with the United States.

Kosovo’s unofficial employment data, estimated by the KSA, shows a decrease from 12.6 percent in 2022 to 10.7 percent in 2024. However, the difficult labor market conditions continue to affect youth and women disproportionately. According to data from KSA, only one in four women in Kosovo participate in the labor force, the fifth lowest labor force participation rate in the world.  While progress has been made, a large informal economy still exists in the country, particularly in the agriculture sector, and is not fully captured in official data.

Kosovo has a relatively young population, with 13.5 percent under 14 and 55 percent under the age of 30. English language capacity, low labor costs, and abundant natural resources have attracted several significant investments. Several international firms, including from the United States, and franchises are present in the Kosovan market.
The Central Bank of Kosovo reported 2024 net FDI at €847.5 million, a significant increase from €732 million in 2022 and €420 million in 2021. FDI from Germany, approximately €201.3 million in 2024, was Kosovo’s largest FDI source, followed by Switzerland with €188.3 million. U.S. investment totaled €87.7 million in 2024, a slight decrease from €98 million in 2022. In addition, Kosovo could benefit from ongoing ‘near shoring’ efforts of many European firms or as a result of the lifting of tariffs on U.S. goods imported into Kosovo. Some beneficial characteristics of the market include:

• Kosovo’s liberal trade regime, which enables duty-free exports for most Kosovan exports to the EU market and EFTA countries (Iceland, Liechtenstein, Norway, and Switzerland). The Stabilization and Association Agreement (SAA) with the EU has further reinforced trade liberalization and removed many of the remaining trade and tariff barriers.
   
• Kosovo’s location in the heart of the Balkans offers easy access to neighboring markets and CEFTA members, a market of approximately 28 million people.
   
• Kosovo’s infrastructure has steadily improved, including the completion of modern highways to Albania and North Macedonia. Kosovo’s international airport maintained an average passenger growth rate of nearly 20 percent per year over the past few years. For 2024, approximately 4.1 million passengers passed through the airport, marking a record-breaking annual increase of 19.2 percent from 2023. The Pristina International Airport completed a runway expansion in late 2021 extending from 2,560 meters to 3050 meters. Kosovo’s young workforce is largely multilingual (often speaking English and/or German).
   
• Kosovo labor costs and tax policies are competitive. The KSA reports that Kosovo’s average pre-tax monthly salary for public and private sector workers is €521. The private sector-only average is €473. These wages are amongst the lowest in Europe, and the current tax regime is business-friendly with a flat 10 percent corporate income tax.
   
• Kosovo bills itself as “the most pro-American country on Earth,” with American businesses viewed positively by the public and Kosovan consumers welcoming American goods.
   
• As a member of the EU-funded Western Balkans 6 (WB6) core transportation network, which aims at improving regional connectivity, Kosovo plans to revitalize key highways and railway lines for both domestic transport and connections with neighboring countries.
   
• With U.S. government support, Kosovo’s Commercial Court began reviewing cases in August 2022 and aims to improve commercial dispute resolution, strengthen judgment enforcement, and create an enabling environment for investment and economic growth. The court has demonstrated success in reducing case backlog and resolving complex commercial disputes in a timely and efficient manner. 
   
• As a fully-fledged member of CEFTA, Kosovo can benefit from CEFTA’s drive toward regional economic integration and greater cooperation between its seven member countries. In October 2024, Kosovo began representing itself in CEFTA. The United Nations Interim Administration Mission in Kosovo (UNMIK) previously represented Kosovo in CEFTA. This development is expected to further galvanize economic integration efforts in the region under CEFTA.
   
• In August 2025, the World Bank and the IMF removed Kosovo from its list of fragile and conflict-affected countries. This change reflects the international view of Kosovo as institutionally stable and financially sound.
   
• In October 2024, Kosovo received its first-ever sovereign credit rating when Fitch Ratings assigned a BB- rating with a stable outlook. This milestone reflects Kosovo’s improving economic stability. The rating is expected to lower borrowing costs, attract foreign investment, and enhance Kosovo’s access to global capital markets. Kosovo’s rating is comparable to those of other countries in the Western Balkans. Factors supporting the rating include low and stable public debt, a sound banking sector, and strong fiscal policy. Balancing these strengths are challenges such as the small size of Kosovo’s economy, economic informality, lack of full international recognition, and reliance on diaspora flows to finance a significant structural trade deficit.