Kosovo

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In 2015, Kosovo’s econ­omy is ex­pected to grow by be­tween 2.5% and 3.3%, ac­cord­ing to fore­casts of the World Bank, the Euro­pean Bank for Re­con­struc­tion and Devel­op­ment, and the In­ter­na­tional Mon­e­tary Fund. In­vestor con­fi­dence and ac­tiv­ity will re­main sub­dued but the po­lit­i­cal sta­bil­ity fol­low­ing the 2014 gen­eral elec­tions, as well as strong re­mit­tance in­flows are ex­pected to back Kosovo’s eco­nomic devel­op­ment.

Kosovo's gross do­mes­tic prod­uct (GDP) growth slowed down in 2014 to an es­ti­mated 2.5%, ac­cord­ing to World Bank fig­ures, due to lack of sig­nif­i­cant eco­nomic re­forms. The coun­try's econ­omy con­tin­ues to be char­ac­ter­ized by high un­em­ploy­ment, es­pe­cially youth un­em­ploy­ment, de­pen­dence on re­mit­tances from em­i­grants and large in­for­mal econ­omy. The un­der­de­vel­oped reg­u­la­tory frame­work and un­sta­ble busi­ness cli­mate, in­clud­ing high cor­rup­tion lev­els are lim­it­ing the ca­pac­ity of the lo­cal econ­omy to at­tract steady for­eign di­rect in­vest­ment (FDI) in­flows.

In Oc­to­ber 2014 the Euro­pean Com­mis­sion said that Kosovo has made lim­ited progress on its path to be­come a func­tion­ing mar­ket econ­omy and sub­stan­tial ef­forts are needed to tackle struc­tural weak­nesses to cope with com­pet­i­tive pres­sures and mar­ket forces over the long term. Strength­en­ing fis­cal pre­dictabil­ity needs to be a pri­or­ity while de­ci­sions on large in­fra­struc­ture projects, such as in the trans­port sec­tor, need to be based on proper cost-ben­e­fit eval­u­a­tions to max­i­mize eco­nomic ben­e­fits, the Euro­pean Com­mis­sion noted.

Re­mit­tances in­flow to Kosovo is es­ti­mated to ac­count for more than 15% of the coun­try's GDP, ac­cord­ing to the World Bank. In 2014 re­mit­tances grew by 9.3% to over 1.0 bil­lion euro. The bulk, or 65.8% of the to­tal, came from EU-mem­ber states led by Ger­many with a 35.0% share. Most of the re­mit­tances, 34.2% of the to­tal, came from em­i­grants liv­ing in Switzer­land, the U.S., and Nor­way.

Kosovo's GDP in­creased by a real 3.3% year-onyear and to­talled 1.441 euro bil­lion in the fourth quar­ter of 2014, ac­cord­ing to lat­est avail­able data from the Kosovo Agency of Sta­tis­tics. Fi­nal con­sump­tion in­creased in value terms by an an­nual 5.1% in the Oc­to­ber-De­cem­ber 2014 pe­riod. Gross cap­i­tal for­ma­tion inched up by 0.1% to 379.3 mil­lion euro. Both ex­ports and im­ports grew -by 29.2% and 7.3%, re­spec­tively.

In­dus­trial sales in the man­u­fac­tur­ing sec­tor jumped by 29.1% year-on-year in the fourth quar­ter of 2014, of­fi­cial sta­tis­tics in­di­cated. Av­er­age an­nual in­fla­tion slowed down to 0.4% in 2014, com­pared to 1.8% a year ear­lier, ac­cord­ing to the Kosovo Agency of Sta­tis­tics.

Un­em­ploy­ment in Kosovo grew to 35.5% of the to­tal labour force at end-2014 from 30.9% a year ear­lier, ac­cord­ing to of­fi­cial sta­tis­tics. Kosovo's cur­rent ac­count deficit widened to 441.0 mil­lion euro in 2014 from 339.4 mil­lion euro in 2013, cen­tral bank data in­di­cated.

FDI in Kosovo nearly halved to 151.2 mil­lion euro in 2014, ac­cord­ing to cen­tral bank data. As much as 94.0% of the to­tal FDI, or 142.1 mil­lion euro, was con­cen­trated in the real estate sec­tor. Switzer­land was the big­gest for­eign in­vestor in Kosovo in 2014,con­tribut­ing 38.2 mil­lion euro in FDI.

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