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Kosovo Economy Profile 2017

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Economy - overviewKosovo's economy has shown progress in transitioning to a market-based system and maintaining macroeconomic stability, but it is still highly dependent on the international community and the diaspora for financial and technical assistance. Remittances from the diaspora - located mainly in Germany, Switzerland, and the Nordic countries - are estimated to account for about 17% of GDP and international donor assistance accounts for approximately 10% of GDP. With international assistance, Kosovo has been able to privatize a majority of its state-owned enterprises.

Kosovo's citizens are the second poorest in Europe, after Moldova, with a per capita GDP (PPP) of $9,600 in 2016. An unemployment rate of 33%, and a youth unemployment rate near 60%, in a country where the average age is 26, encourages emigration and fuels a significant informal, unreported economy. Emigration remains challenging, however, because Kosovo lacks visa-free travel to the EU. Most of Kosovo's population lives in rural towns outside of the capital, Pristina. Inefficient, near-subsistence farming is common - the result of small plots, limited mechanization, and a lack of technical expertise. Kosovo enjoys lower labor costs than the rest of the region. However, high levels of corruption, little contract enforcement, and unreliable electricity supply have discouraged potential investors. The official currency of Kosovo is the euro, but the Serbian dinar is also used illegally in Serb majority communities. Kosovo's tie to the euro has helped keep core inflation low.

Minerals and metals production - including lignite, lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety of construction materials - once the backbone of industry, has declined because of ageing equipment and insufficient investment, problems exacerbated by competing and unresolved ownership claims of Kosovo’s largest mines. A limited and unreliable electricity supply is a major impediment to economic development, but Kosovo has received technical assistance to help improve the sector’s performance. In 2012, Kosovo privatized its electricity supply and distribution network. The US Government is cooperating with the Ministry of Economic Development (MED) and the World Bank to conclude a commercial tender for the construction of Kosovo C, a new lignite-fired power plant that would leverage Kosovo’s large lignite reserves. MED also has plans for the rehabilitation of an older coal power plant, Kosovo B, and the development of a coal mine that could supply both plants.

In June 2009, Kosovo joined the World Bank and International Monetary Fund, and began servicing its share of the former Yugoslavia's debt. In order to help integrate Kosovo into regional economic structures, UNMIK signed (on behalf of Kosovo) its accession to the Central Europe Free Trade Area (CEFTA) in 2006. Kosovo joined the European Bank for Reconstruction and Development in 2012 and the Council of Europe Development Bank in 2013. In 2016, Kosovo implemented the Stabilization and Association Agreement negotiations (SAA) with the EU, focused on trade liberalization. Under the SAA, Kosovo—which gets approximately 58% of government revenue from tariffs on imports—is required to phase out tariffs on EU goods over the next seven years. In 2014, nearly 60% of customs duty-eligible imports into Kosovo were EU goods. In 2015, Kosovo negotiated a $185 million Stand-by Arrangement (SBA) with the IMF following the conclusion of its previous SBA in 2014. The IMF requested an extension of the current SBA to August 2017 to facilitate policy continuity and allow sufficient time for ongoing structural reforms to progress. In August 2015, as part of its EU-facilitated normalization process with Serbia, Kosovo signed agreements on telecommunications and energy distribution, but disagreements over who owns economic assets, such as the Trepca mining conglomerate, within Kosovo continue.

Kosovo experienced its first federal budget deficit in 2012, when government expenditures climbed sharply. In May 2014, the government introduced a 25% salary increase for public sector employees and an equal increase in certain social benefits. Central revenues could not sustain these increases, and the government was forced to reduce its planned capital investments. The government, led by Prime Minister MUSTAFA - a trained economist - recently made several changes to its fiscal policy, expanding the list of duty-free imports, decreasing the Value Added Tax (VAT) for basic food items and public utilities, and increasing the VAT for all other goods.

While Kosovo’s economy continued to make progress, it needs further reform and investment to enable the level of growth required to reduce unemployment and raise living standards in a meaningful way.
GDP (purchasing power parity)$18.49 billion (2016 est.)
$17.83 billion (2015 est.)
$17.27 billion (2014 est.)
note: data are in 2016 dollars
GDP (official exchange rate)$6.56 billion (2016 est.)
GDP - real growth rate3.7% (2016 est.)
2.9% (2015 est.)
1.2% (2014 est.)
GDP - per capita (PPP)$9,600 (2016 est.)
$9,300 (2015 est.)
$9,100 (2014 est.)
note: data are in 2016 US dollars
Gross national saving12.5% of GDP (2016 est.)
12.7% of GDP (2015 est.)
12.5% of GDP (2014 est.)
GDP - composition, by end usehousehold consumption: 90.5%
government consumption: 16%
investment in fixed capital: 28.2%
investment in inventories: 3%
exports of goods and services: 5.8%
imports of goods and services: -43.5% (2014 est.)
GDP - composition by sectoragriculture: 12.9%
industry: 22.6%
services: 64.5% (2009 est.)
Population below poverty line30% (2013 est.)
Labor force483,200
note: includes those estimated to be employed in the grey economy (2013 est.)
Labor force - by occupationagriculture: 5.9%
industry: 16.8%
services: 77.3% (2013)
Unemployment rate34.8% (2016 est.)
34.6% (2015 est.)
note: Kosovo has a large informal sector that may not be reflected in these data
Unemployment, youth ages 15-24total: 55.3%
male: 52%
female: 63.8% (2012 est.)
Distribution of family income - Gini index30 (FY05/06)
Budgetrevenues: $1.396 billion
expenditures: $1.61 billion (2014 est.)
Taxes and other revenues21.3% of GDP (2014 est.)
Budget surplus (+) or deficit (-)-3.3% of GDP (2014 est.)
Public debt10.6% of GDP (2014 est.)
9.1% of GDP (2013)
Inflation rate (consumer prices)0.2% (2016 est.)
-0.5% (2015 est.)
Commercial bank prime lending rate12.8% (30 June 2013 est.)
13.7% (31 December 2012 est.)
Stock of broad money$2.511 billion (2014 est.)
$2.773 billion (2012 est.)
Stock of domestic credit$2.02 billion (2014 est.)
$2.505 billion (2013 est.)
Agriculture - productswheat, corn, berries, potatoes, peppers, fruit; dairy, livestock; fish
Industriesmineral mining, construction materials, base metals, leather, machinery, appliances, foodstuffs and beverages, textiles
Current Account Balance-$651 million (2016 est.)
-$548 million (2015 est.)
Exports$349 million (2014 est.)
$408 million (2013 est.)
Exports - commoditiesmining and processed metal products, scrap metals, leather products, machinery, appliances, prepared foodstuffs, beverages and tobacco, vegetable products, textiles and apparel
Exports - partnersItaly 25.8%, Albania 14.6%, Macedonia 9.6%, China 5.5%, Germany 5.4%, Switzerland 5.4%, Turkey 4.1% (2012 est.)
Imports$2.687 billion (2014 est.)
$3.398 billion (2013 est.)
Imports - commoditiesfoodstuffs, livestock, wood, petroleum, chemicals, machinery, minerals, textiles, stone, ceramic and glass products, electrical equipment
Imports - partnersGermany 11.9%, Macedonia 11.5%, Serbia 11.1%, Italy 8.5%, Turkey 9%, China 6.4%, Albania 4.4% (2012 est.)
Reserves of foreign exchange and gold$NA
Debt - external$1.4 billion (2016 est.)
$1.3 billion (2015 est.)
Stock of direct foreign investment - at home$21.2 billion (31 December 2016 est.)
$26.24 billion (31 December 2015 est.)
Exchange rateseuros (EUR) per US dollar -
0.9214 (2016 est.)
0.885 (2015 est.)
0.885 (2014 est.)
0.7634 (2013 est.)
0.78 (2012 est.)

Source: CIA World Factbook
This page was last updated on July 9, 2017

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