Economic Outline

flag Kosovo Kosovo: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to adress the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Since the end of the war in 1999, Kosovo has experienced solid economic growth. It is also one of the only four European countries that recorded steady positive growth rates in the aftermath of the economic crisis (2008-2012). The country was able to withstand the recession that impacted the rest of Europe due to its limited international integration into the global economy, a steady flow of remittances from its diaspora and donor aid, as well as a generally pro-growth budget, so that GDP grew on average by 3.5% per year in the period 2009-2019. Unfortunately, the country's economy has been severely hit by the COVID-19 pandemic (-5.3% in 2020). Nevertheless, growth rebounded by an estimated 6% in 2021, and GDP is expected to increase by 4.5% this year and 4.2% in 2023, according to the IMF.

In 2008, Kosovo declared independence from Serbia and has since taken steps to integrate into the international community. Kosovo joined the IMF and the World Bank in 2009, the European Bank for Reconstruction and Development (EBRD) in 2012 and the European Investment Bank in 2013. The country also seeks to join the European Union and has accelerated its integration process with the signature of the Stabilisation Association Agreement, which entered into force in 2016. Kosovo's economic performance has outpaced most of its neighbours because of prudent fiscal and financial policies, with the country having the lowest public debt-to-GDP ratio in the region (estimated at 25.8% of GDP in 2021 - IMF). Nevertheless, debt is expected to follow an upward trend this year (28.3%) and the next (29.7% - IMF). The general government balance was negative by 4% of GDP in 2021. As the country’s economic performance improves, the IMF projects the deficit to decrease to 3.1% and 2.9% in 2022 and 2023, respectively. Higher global energy prices prompted a rise in inflation (3.1% last year, from 0.2% in 2020). After peaking at 3.6% in 2022, it should ease to 2.4% the following year. Kosovo imports virtually all consumer goods, which results in a structural trade deficit and has failed to increase the competitiveness of its export sector in recent years. Consequently, its foreign exchange reserves are lower compared to the rest of the region, but remain at comfortable levels, according to the IMF. Kosovo has a euroized economy, like Montenegro, and has a sound financial sector, dominated by banking activities. Banks are well capitalised and profitable, and financial deepening continues. Despite its impressive economic performance in recent years, the country faces many challenges. The economy depends heavily on remittances from its diaspora and imports. The Kosovar government is seeking to invest in upgrading energy infrastructure and improving industrial productivity, which could result in an increase in both current account deficit and public debt in the coming years.

While Kosovo’s economy continued to make progress, further reforms and investments are essential if the country wants to enable the level of growth required to reduce unemployment and significantly raise living standards. In fact, the unemployment rate was estimated at 25.8% as of Q1/2021 (one of the highest rates in Southeast Europe – national statistics office), and Kosovo is the third poorest country in Europe, with nearly one-third of the population living below the poverty line. Per capita GDP (PPP) was estimated at USD 11,949 in 2021 by the IMF. Unemployment levels for first-time job seekers and women are significantly higher than the official rate. Furthermore, the country also suffers from high levels of organised crime and corruption, as well as a lack of transparency.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 7.95e7.78e8.969.7510.53
GDP (Constant Prices, Annual % Change) 4.9-5.3e6.04.54.2
GDP per Capita (USD) 4,4634,3484,9865,4075,816
General Government Balance (in % of GDP) -3.5-6.4-4.0-3.1-2.9
General Government Gross Debt (in % of GDP) 17.624.125.828.329.7
Inflation Rate (%) 2.70.23.13.62.4
Current Account (billions USD) -0.45-0.55-0.71-0.66-0.66
Current Account (in % of GDP) -5.6-7.1e-7.9-6.7-6.3

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 MUR 0.030.030.020.030.02

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 18.7 24.8 56.6
Value Added (in % of GDP) 6.6 37.3 54.0
Value Added (Annual % Change) 0.5 -4.8 -3.2

Source: World Bank - Latest available data.

 
Socio-Demographic Indicators 20212022 (e)2023 (e)
Unemployment Rate (%) 0.00.00.0

Source: IMF – World Economic Outlook Database - Latest available data

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
66,5/100
World Rank:
58
Regional Rank:
32

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
78/180

Source: World Press Freedom Index, Reporters Without Borders

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Sources of General Economic Information

Main Online Newspapers and Portals
SeeNews - Kosovo
Balkan Insight - Kosovo
Koha Ditore
Gazeta Express
Kosovo Report
Useful Resources
Statistical Office of Kosovo
Ministry of Finance
Chamber of Commerce
Central Bank
 
 

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Latest Update: May 2022