SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Kosovo

Kosovo: SME sector overview

The SME landscape

Kosovo is a small, lower-middle-income economy with a resident population of approximately 1.6 million and a nominal gross domestic product (GDP) of EUR 9.7 billion in 2023 and EUR 10.4 billion in 2024 (Eurostat, 2026[7]). GDP per capita in purchasing power standard terms stands at roughly 25% of the EU-27 average – the lowest among the six Western Balkans (WB6) economies – adding approximately 10 percentage points (p.p.) relative to the EU average over 2008-2023, one of the higher rates of convergence recorded in the WB6 during this period (OECD, 2025[8]). Kosovo is fully euroised, operating without an independent monetary policy, and maintains an exceptionally strong fiscal position by regional standards: public debt fell below 17% of GDP in 2024 – the lowest level since 2017 – and the fiscal deficit stood at 0.3% of GDP in 2024, among the smallest in the region (IMF, 2025[9]).

Growth has been robust, with real GDP expanding by 4.6% in 2024, driven primarily by private consumption and investment, though growth moderated to an estimated 3.4% in 2025 amid a protracted political impasse following snap elections in February 2025. Growth is projected to rebound to 3.8% in 2026 and converge toward its potential rate of approximately 4% over the medium term, contingent on the resumption of structural reforms and full implementation of the EU Reform and Growth Facility agenda (IMF, 2026[10]). Diaspora remittances represent a structurally significant source of household income and private investment financing: remittance inflows reached EUR 1.35 billion in 2024, equivalent to approximately 13% of GDP, with Germany and Switzerland as the two dominant source countries, accounting jointly for approximately 75% of the Kosovo-born diaspora abroad. This diaspora-driven income transfer is sustained by large wage differentials – net purchasing power parity (PPP)-adjusted wages in Kosovo stand at just over one-quarter of German levels – which continue to exert strong pull factors on the working-age population (Ayerst, 2025[11]). In relative terms, remittance inflows are projected to ease modestly as a share of GDP over 2025-2027 as these differentials gradually compress, though in absolute terms, flows remain on an upward trajectory (IMF, 2026[10]).

The sectoral composition of value added reflects an economy in the early stages of structural transformation. Wholesale and retail trade is the largest single sector, accounting for4.6% of GDP (2023), followed by manufacturing at 12.9%, construction at 8.1%, agriculture at 7.2%, finance and insurance at 4.3%, and transport and storage at 4.5% (KAS, 2025[12]). High-value-added services remain comparatively underdeveloped: information and communication technologies contributed only 2.0% of GDP in 2023, despite Kosovo recording among the highest internet penetration rates in the region (96.8% of households using the Internet) (OECD, 2025[8]). Public administration, education and health together account for approximately 11% of GDP, underscoring the continued weight of the public sector as an employer and source of demand (KAS, 2025[12]).

Structure and dynamics of the SME sector

Kosovo’s business economy is dominated by micro, small and medium-sized enterprises (MSMEs). According to the Kosovo Agency of Statistics (KAS), 53 080 enterprises were active in Kosovo in 2024 (KAS, 2025[13]). The OECD Economic Convergence Scoreboard for the Western Balkans (2025) identifies Kosovo’s business landscape as disproportionately dominated by MSMEs relative to both WB6 peers and the EU average in terms of both firm numbers and key economic indicators (OECD, 2025[8]). According to data published in the statistical annex of the EU Kosovo 2025 Report (European Commission, 2025[14]), persons employed in small and medium-sized enterprises (SMEs) accounted for between 67% and 82% of total employment in the non-financial business economy over 2020-2023, a range that the Commission explicitly qualifies with a note that the underlying data are supplied by Kosovo’s statistical authority and published on an “as is” basis without assurance as regards quality or adherence to EU statistical methodology. This year-on-year variation of 15 p.p. is implausibly large as a reflection of actual SME sector dynamics and most likely reflects either measurement inconsistencies in the source data or significant variation in the reported activity of a small number of large enterprises, which can mechanically shift the SME employment share in a small economy. A more reliable size-disaggregated indicator is provided by enterprise investment statistics (KAS, 2025[15]). The combined SME segment (enterprises with 1-249 employees) generated 76.5% of all business investment in 2023, the only comprehensive size-disaggregated metric available from official statistical sources.

Enterprise dynamics over the decade 2015-2024 point to a steady broadening of the business base. The stock of active enterprises grew from 39 772 in 2015 to 53 080 in 2024, representing an increase of approximately one-third over the period (compound annual growth rate [CAGR]: 3.3%). Entry rates consistently outpaced exits throughout the period: new registrations averaged around 10 500 per year over 2016-2024, accelerating to a decade high of 12 051 in 2024, while terminated enterprises averaged approximately 1 700 per year, implying a ratio of roughly six new enterprises registered for every one terminated (KAS, 2025[13]). Wholesale and retail trade accounted for the largest share of new entries (approximately 26% of 2023 registrations), followed by accommodation and food services and construction. The size structure of new entrants mirrors the overall stock: the overwhelming majority are microenterprises with zero or very few employees, consistent with entry patterns observed across the WBT region (KAS, 2024[4]).

The sectoral composition of the business economy is heavily tilted towards domestically oriented services (Table 4). Wholesale and retail trade alone accounts for 38% of all active enterprises and an estimated 33% of business-economy employment, as well as approximately 52% of aggregate enterprise turnover, reflecting the sector’s dominant position in revenue terms despite comparatively modest value-added content relative to turnover. Manufacturing (13% of firms) exhibits higher employment intensity (16% of employment) and a more balanced turnover share, suggesting greater average firm size. The information and communication technology (ICT) sector represents only 4% of firms but accounts for 6% of employment and commands the highest average monthly wages in the business economy at EUR 974, nearly double the enterprise sector average of EUR 535 (KAS, 2024[3]), signalling an emerging productivity premium with significant policy implications for skills development and structural transformation. Construction, at 8% of enterprises and 10% of employment, has become an important employer and is the largest single destination for enterprise investment, reflecting ongoing residential and commercial building cycles (KAS, 2024[3]).

Table 4. Sectoral profile of Kosovo’s business economy, selected sectors, 2023

	Sectoral weight in the business economy			Investment profile	Macro context
Sector	Share of total enterprise count1	Share of business-economy employment2	Share of total enterprise turnover3	Share of total business investment4	Gross value added (EUR millions)5	Sector share in GDP6
Wholesale and retail trade	38%	33%	52%	24%	1 414	15%
Manufacturing	13%	16%	12%	22%	1 251	13%
Construction	8%	10%	7%	22%	782	8%
Transport and storage	6%	6%	5%	7%	431	5%
Accommodation and food services	9%	8%	4%	4%	207	2%
Information and communication	4%	6%	5%	5%	198	2%
Other sectors	22%	21%	15%	17%	3 397	35%

Notes:

1. Each sector’s share in the business economy in 2023 (KAS, 2024[3]). The sectors shown account for approximately 78% of all registered enterprises; the remaining firms are distributed across real estate, professional services, administrative services, and other personal activities.

2. Each sector’s share of total persons employed in the enterprise sector (KAS, 2024[3]). Figures for some sectors are approximate; see source note.

3. Each sector’s share of aggregate turnover (KAS, 2024[3]). Wholesale and retail trade alone accounts for more than half of all enterprise revenue, reflecting the inherent turnover intensity of trading activities.

4. Each sector’s share of total enterprise investment of EUR 1 245 million (KAS, 2024[16]). This is the only data dimension in Table 1 with partial size-class disaggregation available separately (see Table 5).

5. Gross value added at current prices (in EUR millions), from KAS official accounts, 2023. Agriculture (Section A: EUR 699 million) and financial and insurance activities (Section K: EUR 417 million) are excluded from the business economy analysis but absorbed into “Other sectors” for completeness of gross domestic product (GDP) coverage.

6. Sector share in total GDP, 2023 official accounts. Independent of enterprise size, it reflects the sector’s macroeconomic weight in the overall economy.

Business economy excludes agriculture (Section A) and financial and insurance activities (Section K).

Reading guide: Columns 1-3 show how the enterprise population, its workforce and revenues are distributed across sectors. Column 4 shows the investment dimension from the enterprise investment survey – the sole data source with size-class information (presented separately in Table 5). Columns 5-6 show the macroeconomic weight of each sector, independent of enterprise size. Unlike other WBT economy chapters, MSME-specific shares within sectors cannot be reported because there are no size-disaggregated structural business statistics.

Source: (KAS, 2024[3]; 2024[16]; 2024[17]), OECD calculations.

The sectoral distribution has shifted meaningfully over the past decade. Wholesale and retail trade – still the dominant sector – saw its share of active enterprises contract from 51% in 2015 to 38% in 2023, a decline of 13 p.p., indicating a gradual diversification of the enterprise base away from low-value-added trading activity. The sectors absorbing this shift were other service activities (up from 10% to 22% of enterprises) and, to a lesser degree, information and communication (up from 3% to 4%) and construction (up from 8% to 9%). The employment structure moved in the same direction but more moderately: wholesale and retail trade’s share of employment fell from 36% to 33%, while other service activities and ICT gained ground (KAS, 2024[3]). Taken together, these structural trends suggest that Kosovo’s enterprise economy is gradually broadening beyond its traditional trade-dominated base. However, the pace of reorientation towards higher value-added sectors remains modest relative to the scale of the structural challenge.

Investment by enterprise size

Kosovo’s statistical office does not publish size-disaggregated employment or value added data in its structural business statistics, precluding the calculation of labour productivity by enterprise size class. Enterprise investment data – the only comprehensive size-disaggregated metric available – are therefore used as the primary analytical lens.

Total enterprise investments in 2023 amounted to EUR 1 245 million, equivalent to approximately 12.9% of GDP. The size breakdown reveals a significant structural pattern: medium enterprises (50‑249 employees) are the single largest investing group, accounting for 38.9% of total investment despite representing a fraction of a per cent of the enterprise count. Small enterprises (10-49 employees) contribute a further 28.7%. The combined SME segment generates 76.5% of all business investment, with large enterprises (250+ employees) accounting for the remaining 23.5%. At the other end of the distribution, microenterprises, which account for 99.2% of all active firms, contribute only 9.0% of investment, suggesting severe financing and scale constraints at the bottom of the enterprise size spectrum (KAS, 2025[15]) (Table 5).

Table 5. Enterprise investment by size class in Kosovo, 2023

Indicator	Micro (1-9 employees)	Small (10-49 employees)	Medium (50-249 employees)	SME total (1-249 employees)	Large (250+ employees)
Investment levels (2023)
Total investment (EUR millions)1	112	357	484	953	293
Share of total investment (%)	9.0%	28.7%	38.9%	76.5%	23.5%
Share of enterprise count (%)2	99.2%	0.6%	0.1%	~100%	<0.1%
Investment composition (% of size-class total)
Of which: construction (≈)	~61%	~59%	~62%	~61%	~61%
Of which: machinery and equipment (≈)	~31%	~31%	~31%	~31%	~30%
Financing structure (% of size-class investment)
Own funds3	~55%	~55%	~55%	~55%	~55%
Local bank credit	~35%	~35%	~35%	~35%	~35%

Notes:

1. Total investment: Gross investment in tangible and intangible fixed assets by resident enterprises (reference year 2023, KAS Enterprise Investment Survey). Values derived from published percentage shares applied to the total investment of EUR 1 245 million.

2. Share of enterprise count derived from KAS Statistical Repertoire of Enterprises (2024), 2024 stock: 53 080 active enterprises. The micro share (99.2%) underscores the asymmetry between firm-count dominance and investment contribution.

3. Investment composition and financing structure shares are economy-wide averages (construction 60.9%, machinery and equipment 30.6%; own funds 54.9%, local bank credit 35.4%) applied uniformly across size classes, as size-specific breakdowns by investment type or financing source are not published in the KAS Enterprise Investment Survey.

Sources: (KAS, 2024[16]; 2024[4]), OECD calculations.

The composition of enterprise investment is dominated by construction (60.9% of total) and acquisition of machinery and equipment (30.6%), with intellectual property products (1.2%) and other tangible assets (7.2%) accounting for the remainder. This profile, with construction dominating capital formation across all size classes, is consistent with ongoing residential and commercial building activity and reflects the underdevelopment of technology-intensive investment relative to EU peers. By sector, wholesale and retail trade (23.6%), construction (22.0%), and manufacturing (21.7%) together account for nearly two-thirds of total enterprise investment, consistent with their combined weight in employment and value added. Regionally, investment is highly concentrated: Pristina municipality alone accounts for 47.7% of total enterprise investment, pointing to spatial imbalances that warrant place-based policy responses (KAS, 2025[15]).

The financing structure of enterprise investment reveals both the strengths and limits of Kosovo’s capital market environment. Own funds are the dominant source, accounting for 54.9% of total investment in 2023, with local bank loans accounting for a further 35.4%. Government grants and programmes account for 2.5%, domestic co-investors for 4.2%, and foreign creditors for a negligible 0.03% (KAS, 2025[15]). This underscores the near-complete absence of international capital market integration in enterprise financing. This is despite Kosovo’s otherwise strong banking sector performance: the OECD Scoreboard (2025) confirms that Kosovo is the only Western Balkan economy where SMEs’ share of total corporate bank credit (61.8%) exceeds the EU average (49.5%), and that public financial support for SMEs – primarily through the Kosovo Credit Guarantee Fund (KCGF) – amounted to 3.7% of GDP in 2022, the highest in the WB6 region (OECD, 2025[8]). This public guarantee activity has expanded substantially: the KCGF portfolio reached EUR 173 million in guaranteed loans in 2024 (1.7% of GDP), nearly double the level recorded in 2022 (see Dimension 6). Yet the depth of non-bank financing remains critically limited – Kosovo currently lacks a stock exchange and a dedicated legal framework for corporate securities issuance, with a concept document for capital market development only adopted in 2024. Developing alternative financing instruments for growth-oriented SMEs, therefore, remains a medium-term structural priority.

SME outlook

Kosovo’s enterprise base has expanded steadily, with the stock of active firms growing by one-third over 2015-2024 and new registrations reaching a decade high of 12 051 in 2024. Yet the growth dynamic is structurally shallow. The overwhelming majority of entrants are microenterprises with zero or very few employees, concentrated in wholesale and retail trade, a sector that accounts for 38% of all active firms and over half of aggregate enterprise turnover but generates comparatively modest value added relative to revenues (KAS, 2025[13]). Employment remains anchored in low-productivity, domestically oriented activities, and the MSME segment exhibits limited capacity to transition towards higher value-added sectors, a pattern consistent with the wider Western Balkan trend of expanding SME economic weight without commensurate productivity growth (OECD, 2025[8]).

The structural weaknesses are most visible in Kosovo’s critically underdeveloped export capacity. Kosovo’s manufactured export capacity stood at only EUR 221 per capita in 2020, less than one-seventh of the WB6 average of EUR 1 500 per capita, and the firm-level export survival record is equally fragile. Of approximately 4 600 enterprises engaged in goods exports over 2008-2018, 44% could not sustain export activity for more than one year, while only 2.1% achieved uninterrupted export presence throughout the period (Ministry of Industry, Entrepreneurship and Trade, 2023[18]). Most SMEs operate exclusively in short, domestically oriented value chains, with limited capacity to integrate into international production networks. The manufacturing sector, which accounts for 13% of enterprises and 12.9% of GDP, retains a small industrial base concentrated in low-value-added activities, with foreign direct investment inflows into manufacturing declining sharply over the past decade. Taken together, these trends point to an enterprise sector that is widening in number but not deepening in productivity or competitiveness.

Several structural developments offer tangible opportunities. The ICT sector, while representing only 4% of enterprises, already commands average monthly wages of EUR 974, nearly double the enterprise sector average of EUR 535, signalling a productivity premium that policy can seek to amplify. The gradual sectoral recomposition of the enterprise base, with wholesale and retail trade’s share of active firms contracting from 51% in 2015 to 38% in 2023, and other services, construction and ICT absorbing the shift, is moving in the right direction, even if the pace remains modest (KAS, 2024[3]). Kosovo’s first-ever dedicated industrial strategy, the Strategy for Industrial Development and Business Support 2030, adopted in 2023, provides a policy anchor for supporting manufacturing development and export diversification. Translating these positive signals into sustained enterprise upgrading hinges on closing the gap between policy ambition and institutional execution, a recurring challenge across the dimensions assessed in this publication.

The urgency of structural upgrading is underscored by acute demographic and labour market pressures that are already reshaping the operating environment for SMEs. Kosovo’s resident population has declined by approximately 10% since 2012 (KAS, 2026[19]), and the employment rate of 38.6% in 2024 (KAS, 2026[20]) – the lowest in the WB6 and less than half the EU average – reflects both high inactivity and accelerating emigration following the introduction of visa-free travel in January 2024. Business survey evidence confirms the severity of these pressures: 37% of Kosovo enterprises identified labour shortages as a major obstacle to growth, the second-highest share in the WB6, and Kosovo was the only economy in the region where brain drain worsened as a perceived obstacle between 2023 and 2024 (RCC, 2024[21]). The policy instruments adopted in recent years, from the industrial strategy to expanded credit guarantees, provide a foundation, but their impact will be measured by execution rather than design.

References

[11] Ayerst, S. (2025), Labor Market Integration and Migration, Republic of Kosovo, International Monetary Fund, https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025001.pdf.

[14] European Commission (2025), Kosovo 2025 Report, European Commission, Directorate-General for European Neighbourhood Policy and Enlargement Negotiations.

[2] European Commission (2003), Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises, Official Journal of the European Union, L 124, 20 May, Brussels, https://eur-lex.europa.eu/eli/reco/2003/361/oj/eng.

[7] Eurostat (2026), National accounts (database), https://ec.europa.eu/eurostat/web/national-accounts/database.

[6] Eurostat (n.d.), International trade in goods by enterprise characteristics, https://ec.europa.eu/eurostat/web/international-trade-in-goods/database.

[10] IMF (2026), Kosovo: Staff Concluding Statement for the 2026 Article IV Consultation Mission, International Monetary Fund.

[9] IMF (2025), Kosovo: Fourth and Final Reviews under the Stand-By Arrangement and Resilience and Sustainability Facility Arrangement – Press Release and Staff Report, International Monetary Fund, https://www.imf.org/-/media/files/publications/cr/2025/english/1kosea2025001-print-pdf.pdf.

[20] KAS (2026), Labour Force Survey (LFS), Kosovo Agency of Statistics.

[19] KAS (2026), Population Statistics (database).

[15] KAS (2025), Enterprise Investment Statistics, Kosovo Agency of Statistics.

[12] KAS (2025), Gross Value Added by Economic Activity at Current Prices, NACE Rev.2.

[13] KAS (2025), Key Statistical Indicators - Statistical Register of Businesses, Kosovo Agency of Statistics.

[16] KAS (2024), Enterprise Investment Statistics 2023, Kosovo Agency of Statistics.

[5] KAS (2024), Key Statistical Indicators – Statistical Register of Businesses, Kosovo Agency of Statistics, Pristina, https://askdata.rks-gov.net/pxweb/en/ASKdata/ASKdata__Statistical%20business%20register/.

[17] KAS (2024), Official Accounts by Economic Activity 2008-2024, Kosovo Agency of Statistics.

[3] KAS (2024), Results of the Structural Business Survey 2023, Kosovo Agency of Statistics, Pristina, https://askdata.rks-gov.net/pxweb/en/ASKdata/ASKdata__Structural%20business%20statistics/.

[4] KAS (2024), Statistical Repertoire of Enterprises in Kosovo, Kosovo Agency of Statistics, Pristina, https://askapi.rks-gov.net/Custom/31f45357-2769-4850-9c1b-b7aa76654c1f.pdf.

[1] Kosovo Assembly (2018), Law No. 06/L-032 on Accounting, Financial Reporting and Auditing, Official Gazette, No. 3/2018, 19 April, Pristina, https://gzk.rks-gov.net/ActDetail.aspx?ActID=16268&langid=2.

[18] Ministry of Industry, Entrepreneurship and Trade (2023), Strategy for Industrial Development and Business Support 2023–2030, Government of Kosovo.

[8] OECD (2025), Economic Convergence Scoreboard for the Western Balkans 2025, OECD Publishing, Paris, https://doi.org/10.1787/bc0babf3-en.

[21] RCC (2024), Balkan Barometer: Business Opinion, Regional Cooperation Council.