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.