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Serbia vs. Kosovo

Economy

SerbiaKosovo
Economy - overview

Serbia has a transitional economy largely dominated by market forces, but the state sector remains significant in certain areas. The economy relies on manufacturing and exports, driven largely by foreign investment. MILOSEVIC-era mismanagement of the economy, an extended period of international economic sanctions, civil war, and the damage to Yugoslavia's infrastructure and industry during the NATO airstrikes in 1999 left the economy worse off than it was in 1990. In 2015, Serbia’s GDP was 27.5% below where it was in 1989.

After former Federal Yugoslav President MILOSEVIC was ousted in September 2000, the Democratic Opposition of Serbia (DOS) coalition government implemented stabilization measures and embarked on a market reform program. Serbia renewed its membership in the IMF in December 2000 and rejoined the World Bank and the European Bank for Reconstruction and Development. Serbia has made progress in trade liberalization and enterprise restructuring and privatization, but many large enterprises - including the power utilities, telecommunications company, natural gas company, and others - remain state-owned. Serbia has made some progress towards EU membership, gaining candidate status in March 2012. In January 2014, Serbia's EU accession talks officially opened and, as of December 2017, Serbia had opened 12 negotiating chapters including one on foreign trade. Serbia's negotiations with the WTO are advanced, with the country's complete ban on the trade and cultivation of agricultural biotechnology products representing the primary remaining obstacle to accession. Serbia maintains a three-year Stand-by Arrangement with the IMF worth approximately $1.3 billion that is scheduled to end in February 2018. The government has shown progress implementing economic reforms, such as fiscal consolidation, privatization, and reducing public spending.

Unemployment in Serbia, while relatively low (16% in 2017) compared with its Balkan neighbors, remains significantly above the European average. Serbia is slowly implementing structural economic reforms needed to ensure the country's long-term prosperity. Serbia reduced its budget deficit to 1.7% of GDP and its public debt to 71% of GDP in 2017. Public debt had more than doubled between 2008 and 2015. Serbia's concerns about inflation and exchange-rate stability preclude the use of expansionary monetary policy.

Major economic challenges ahead include: stagnant household incomes; the need for private sector job creation; structural reforms of state-owned companies; strategic public sector reforms; and the need for new foreign direct investment. Other serious longer-term challenges include an inefficient judicial system, high levels of corruption, and an aging population. Factors favorable to Serbia's economic growth include the economic reforms it is undergoing as part of its EU accession process and IMF agreement, its strategic location, a relatively inexpensive and skilled labor force, and free trade agreements with the EU, Russia, Turkey, and countries that are members of the Central European Free Trade Agreement.

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.

GDP (purchasing power parity)$126.625 billion (2019 est.)

$121.464 billion (2018 est.)

$116.239 billion (2017 est.)

note: data are in 2010 dollars
$20.396 billion (2019 est.)

$19.579 billion (2018 est.)

$18.86 billion (2017 est.)

note: data are in 2010 dollars
GDP - real growth rate4.18% (2019 est.)

4.4% (2018 est.)

2.05% (2017 est.)
3.7% (2017 est.)

4.1% (2016 est.)

4.1% (2015 est.)
GDP - per capita (PPP)$18,233 (2019 est.)

$17,395 (2018 est.)

$16,556 (2017 est.)

note: data are in 2010 dollars
$11,368 (2019 est.)

$10,895 (2018 est.)

$10,530 (2017 est.)

note: data are in 2016 US dollars
GDP - composition by sectoragriculture: 9.8% (2017 est.)

industry: 41.1% (2017 est.)

services: 49.1% (2017 est.)
agriculture: 11.9% (2017 est.)

industry: 17.7% (2017 est.)

services: 70.4% (2017 est.)
Population below poverty line23.2% (2018 est.)17.6% (2015 est.)
Household income or consumption by percentage sharelowest 10%: 2.2%

highest 10%: 23.8% (2011)
lowest 10%: 3.8%

highest 10%: 22% (2015 est.)
Inflation rate (consumer prices)-0.1% (2019 est.)

-1.1% (2018 est.)

2% (2017 est.)
2.6% (2019 est.)

1% (2018 est.)

1.4% (2017 est.)
Labor force3 million (2020 est.)500,300 (2017 est.)

note: includes those estimated to be employed in the gray economy
Labor force - by occupationagriculture: 19.4%

industry: 24.5%

services: 56.1% (2017 est.)
agriculture: 4.4%

industry: 17.4%

services: 78.2% (2017 est.)
Unemployment rate14.1% (2017 est.)

15.9% (2016 est.)
30.5% (2017 est.)

27.5% (2016 est.)

note: Kosovo has a large informal sector that may not be reflected in these data
Distribution of family income - Gini index36.2 (2017 est.)

28.2 (2008 est.)
29 (2017 est.)

24.1 (2014 est.)
Budgetrevenues: 17.69 billion (2017 est.)

expenditures: 17.59 billion (2017 est.)

note: data include both central government and local goverment budgets
revenues: 2.054 billion (2017 est.)

expenditures: 2.203 billion (2017 est.)
Industriesautomobiles, base metals, furniture, food processing, machinery, chemicals, sugar, tires, clothes, pharmaceuticalsmineral mining, construction materials, base metals, leather, machinery, appliances, foodstuffs and beverages, textiles
Industrial production growth rate3.9% (2017 est.)1.2% (2016 est.)
Agriculture - productsmaize, wheat, sugar beet, milk, sunflower seed, potatoes, soybeans, plums/sloes, apples, barleywheat, corn, berries, potatoes, peppers, fruit; dairy, livestock; fish
Exports$15.92 billion (2017 est.)

$13.99 billion (2016 est.)
$428 million (2017 est.)

$340 million (2016 est.)
Exports - commoditiesinsulated wiring, tires, corn, cars, iron products, copper (2019)mining and processed metal products, scrap metals, leather products, machinery, appliances, prepared foodstuffs, beverages and tobacco, vegetable products, textiles and apparel
Exports - partnersGermany 12%, Italy 10%, Bosnia and Herzegovina 7%, Romania 6%, Russia 5%  (2019)Albania 16%, India 14%, North Macedonia 12.1%, Serbia 10.6%, Switzerland 5.6%, Germany 5.4% (2017)
Imports$20.44 billion (2017 est.)

$17.63 billion (2016 est.)
$3.223 billion (2017 est.)

$2.876 billion (2016 est.)
Imports - commoditiescrude petroleum, cars, packaged medicines, natural gas, refined petroleum (2019)foodstuffs, livestock, wood, petroleum, chemicals, machinery, minerals, textiles, stone, ceramic and glass products, electrical equipment
Imports - partnersGermany 13%, Russia 9%, Italy 8%, Hungary 6%, China 5%, Turkey 5% (2019)Germany 12.4%, Serbia 12.3%, Turkey 9.6%, China 9.1%, Italy 6.4%, North Macedonia 5.1%, Albania 5%, Greece 4.4% (2017)
Debt - external$30.927 billion (2019 est.)

$30.618 billion (2018 est.)
$2.388 billion (2019 est.)

$2.409 billion (2018 est.)
Exchange ratesSerbian dinars (RSD) per US dollar -

112.4 (2017 est.)

111.278 (2016 est.)

111.278 (2015 est.)

108.811 (2014 est.)

88.405 (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 debt62.5% of GDP (2017 est.)

73.1% of GDP (2016 est.)
21.2% of GDP (2017 est.)

19.4% of GDP (2016 est.)
Reserves of foreign exchange and gold$11.91 billion (31 December 2017 est.)

$10.76 billion (31 December 2016 est.)
$683.9 million (31 December 2016 est.)

$708.7 million (31 December 2015 est.)
Current Account Balance-$2.354 billion (2017 est.)

-$1.189 billion (2016 est.)
-$467 million (2017 est.)

-$533 million (2016 est.)
GDP (official exchange rate)$51.449 billion (2019 est.)$7.926 billion (2019 est.)
Taxes and other revenues42.7% (of GDP) (2017 est.)29% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)0.2% (of GDP) (2017 est.)-2.1% (of GDP) (2017 est.)
Unemployment, youth ages 15-24total: 27.5%

male: 26.1%

female: 29.9% (2019 est.)
total: 49.5%

male: 44.2%

female: 60.4% (2019 est.)
GDP - composition, by end usehousehold consumption: 78.2% (2017 est.)

government consumption: 10.1% (2017 est.)

investment in fixed capital: 18.5% (2017 est.)

investment in inventories: 2% (2017 est.)

exports of goods and services: 52.5% (2017 est.)

imports of goods and services: -61.3% (2017 est.)
household 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.)
Gross national saving18.2% of GDP (2019 est.)

18.7% of GDP (2018 est.)

15.5% of GDP (2017 est.)
24.4% of GDP (2019 est.)

20.7% of GDP (2018 est.)

22.7% of GDP (2017 est.)

Source: CIA Factbook