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Kosovo vs. Montenegro

Economy

KosovoMontenegro
Economy - overview

Kosovo'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 $10,400 in 2017. 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. 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 aging 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. 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 bituminous-fired 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, the Central Europe Free Trade Area (CEFTA) in 2006, 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 (SAA) negotiations with the EU, focused on trade liberalization. In 2014, nearly 60% of customs duty-eligible imports into Kosovo were EU goods. 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, unemployment has not been reduced, nor living standards raised, due to lack of economic reforms and investment.

Montenegro's economy is transitioning to a market system. Around 90% of Montenegrin state-owned companies have been privatized, including 100% of banking, telecommunications, and oil distribution. Tourism, which accounts for more than 20% of Montenegro's GDP, brings in three times as many visitors as Montenegro's total population every year. Several new luxury tourism complexes are in various stages of development along the coast, and a number are being offered in connection with nearby boating and yachting facilities. In addition to tourism, energy and agriculture are considered two distinct pillars of the economy. Only 20% of Montenegro's hydropower potential is utilized. Montenegro plans to become a net energy exporter, and the construction of an underwater cable to Italy, which will be completed by the end of 2018, will help meet its goal.

Montenegro uses the euro as its domestic currency, though it is not an official member of the euro zone. In January 2007, Montenegro joined the World Bank and IMF, and in December 2011, the WTO. Montenegro began negotiations to join the EU in 2012, having met the conditions set down by the European Council, which called on Montenegro to take steps to fight corruption and organized crime.

The government recognizes the need to remove impediments in order to remain competitive and open the economy to foreign investors. Net foreign direct investment in 2017 reached $848 million and investment per capita is one of the highest in Europe, due to a low corporate tax rate. The biggest foreign investors in Montenegro in 2017 were Norway, Russia, Italy, Azerbaijan and Hungary.

Montenegro is currently planning major overhauls of its road and rail networks, and possible expansions of its air transportation system. In 2014, the Government of Montenegro selected two Chinese companies to construct a 41 km-long section of the country's highway system, which will become part of China's Belt and Road Initiative. Cheaper borrowing costs have stimulated Montenegro's growing debt, which currently sits at 65.9% of GDP, with a forecast, absent fiscal consolidation, to increase to 80% once the repayment to China's Ex/Im Bank of a _800 million highway loan begins in 2019. Montenegro first instituted a value-added tax (VAT) in April 2003, and introduced differentiated VAT rates of 17% and 7% (for tourism) in January 2006. The Montenegrin Government increased the non-tourism Value Added Tax (VAT) rate to 21% as of January 2018, with the goal of reducing its public debt.

GDP (purchasing power parity)$20.396 billion (2019 est.)

$19.579 billion (2018 est.)

$18.86 billion (2017 est.)

note: data are in 2010 dollars
$13.357 billion (2019 est.)

$12.835 billion (2018 est.)

$12.215 billion (2017 est.)

note: data are in 2017 dollars
GDP - real growth rate3.7% (2017 est.)

4.1% (2016 est.)

4.1% (2015 est.)
4.3% (2017 est.)

2.9% (2016 est.)

3.4% (2015 est.)
GDP - per capita (PPP)$11,368 (2019 est.)

$10,895 (2018 est.)

$10,530 (2017 est.)

note: data are in 2016 US dollars
$21,470 (2019 est.)

$20,629 (2018 est.)

$19,627 (2017 est.)

note: data are in 2017 dollars
GDP - composition by sectoragriculture: 11.9% (2017 est.)

industry: 17.7% (2017 est.)

services: 70.4% (2017 est.)
agriculture: 7.5% (2016 est.)

industry: 15.9% (2016 est.)

services: 76.6% (2016 est.)
Population below poverty line17.6% (2015 est.)24.5% (2018 est.)
Household income or consumption by percentage sharelowest 10%: 3.8%

highest 10%: 22% (2015 est.)
lowest 10%: 3.5%

highest 10%: 25.7% (2014 est.)
Inflation rate (consumer prices)2.6% (2019 est.)

1% (2018 est.)

1.4% (2017 est.)
0.3% (2019 est.)

2.6% (2018 est.)

2.3% (2017 est.)
Labor force500,300 (2017 est.)

note: includes those estimated to be employed in the gray economy
167,000 (2020 est.)
Labor force - by occupationagriculture: 4.4%

industry: 17.4%

services: 78.2% (2017 est.)
agriculture: 7.9%

industry: 17.1%

services: 75% (2017 est.)
Unemployment rate30.5% (2017 est.)

27.5% (2016 est.)

note: Kosovo has a large informal sector that may not be reflected in these data
15.82% (2019 est.)

18.8% (2018 est.)
Distribution of family income - Gini index29 (2017 est.)

24.1 (2014 est.)
39 (2015 est.)

32.3 (2013 est.)
Budgetrevenues: 2.054 billion (2017 est.)

expenditures: 2.203 billion (2017 est.)
revenues: 1.78 billion (2017 est.)

expenditures: 2.05 billion (2017 est.)
Industriesmineral mining, construction materials, base metals, leather, machinery, appliances, foodstuffs and beverages, textilessteelmaking, aluminum, agricultural processing, consumer goods, tourism
Industrial production growth rate1.2% (2016 est.)-4.2% (2017 est.)
Agriculture - productswheat, corn, berries, potatoes, peppers, fruit; dairy, livestock; fishmilk, potatoes, grapes, vegetables, tomatoes, watermelons, wheat, apples, cabbages, barley
Exports$428 million (2017 est.)

$340 million (2016 est.)
$422.2 million (2017 est.)

$362 million (2016 est.)
Exports - commoditiesmining and processed metal products, scrap metals, leather products, machinery, appliances, prepared foodstuffs, beverages and tobacco, vegetable products, textiles and apparelaluminum, packaged medicines, cars, zinc, wine (2019)
Exports - partnersAlbania 16%, India 14%, North Macedonia 12.1%, Serbia 10.6%, Switzerland 5.6%, Germany 5.4% (2017)Serbia 17%, Hungary 15%, China 11%, Russia 7%, Bosnia and Herzegovina 6%, Germany 6%, Italy 5%, Poland 5% (2019)
Imports$3.223 billion (2017 est.)

$2.876 billion (2016 est.)
$2.618 billion (2017 est.)

$2.29 billion (2016 est.)
Imports - commoditiesfoodstuffs, livestock, wood, petroleum, chemicals, machinery, minerals, textiles, stone, ceramic and glass products, electrical equipmentrefined petroleum, cars, packaged medicines, recreational boats, cigarettes (2019)
Imports - partnersGermany 12.4%, Serbia 12.3%, Turkey 9.6%, China 9.1%, Italy 6.4%, North Macedonia 5.1%, Albania 5%, Greece 4.4% (2017)Serbia 30%, Bosnia and Herzegovina 8%, Croatia 8%, Italy 6%, Greece 6%, Germany 5% (2019)
Debt - external$2.388 billion (2019 est.)

$2.409 billion (2018 est.)
$2.516 billion (31 December 2017 est.)

$2.224 billion (31 December 2016 est.)
Exchange rateseuros (EUR) per US dollar -

0.885 (2017 est.)

0.903 (2016 est.)

0.9214 (2015 est.)

0.885 (2014 est.)

0.7634 (2013 est.)
euros (EUR) per US dollar -

0.885 (2017 est.)

0.903 (2016 est.)

0.9214 (2015 est.)

0.885 (2014 est.)

0.7634 (2013 est.)
Public debt21.2% of GDP (2017 est.)

19.4% of GDP (2016 est.)
67.2% of GDP (2017 est.)

66.4% of GDP (2016 est.)

note: data cover general government debt, and includes debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intragovernmental debt; intragovernmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions
Reserves of foreign exchange and gold$683.9 million (31 December 2016 est.)

$708.7 million (31 December 2015 est.)
$1.077 billion (31 December 2017 est.)

$846.5 million (31 December 2016 est.)
Current Account Balance-$467 million (2017 est.)

-$533 million (2016 est.)
-$780 million (2017 est.)

-$710 million (2016 est.)
GDP (official exchange rate)$7.926 billion (2019 est.)$5.486 billion (2019 est.)
Ease of Doing Business Index scoresOverall score: 73.2 (2020)

Starting a Business score: 95.9 (2020)

Trading score: 94.2 (2020)

Enforcement score: 64.7 (2020)
Overall score: 73.8 (2020)

Starting a Business score: 86.7 (2020)

Trading score: 91.9 (2020)

Enforcement score: 66.8 (2020)
Taxes and other revenues29% (of GDP) (2017 est.)37.2% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)-2.1% (of GDP) (2017 est.)-5.6% (of GDP) (2017 est.)
Unemployment, youth ages 15-24total: 49.5%

male: 44.2%

female: 60.4% (2019 est.)
total: 25.2%

male: 25.8%

female: 24.3% (2019 est.)
GDP - composition, by end usehousehold consumption: 84.3% (2017 est.)

government consumption: 13.6% (2017 est.)

investment in fixed capital: 29% (2017 est.)

investment in inventories: 0% (2016 est.)

exports of goods and services: 27% (2017 est.)

imports of goods and services: -53.8% (2017 est.)
household consumption: 76.8% (2016 est.)

government consumption: 19.6% (2016 est.)

investment in fixed capital: 23.2% (2016 est.)

investment in inventories: 2.9% (2016 est.)

exports of goods and services: 40.5% (2016 est.)

imports of goods and services: -63% (2016 est.)
Gross national saving24.4% of GDP (2019 est.)

20.7% of GDP (2018 est.)

22.7% of GDP (2017 est.)
16.9% of GDP (2019 est.)

14.9% of GDP (2018 est.)

14.2% of GDP (2017 est.)

Source: CIA Factbook