Economy of Kosovo
Encyclopedia
The economy of Kosovo
is a transition economy
Despite substantial development subsidies, Kosovo was the poorest province of the former Yugoslavia
. During the 1990s poor economic policies, international sanctions, little access to external trade and finance, and ethnic conflict severely damaged the already-weak economy. After the declaration of independence
of 2008 the situation deteriorated further; the uncertain international status of Kosovo, its widespread official corruption and the pervasive influence of organised crime made it difficult to attract investment and loans. Both unemployment
and poverty
rates are estimated at close to half the population.
was low, while the budget posted a deficit for the first time in 2004. Kosovo has a negative balance of trade; in 2004, the deficit of the balance of goods and services was close to 70 percent of GDP. Payments from persons living abroad accounted for an estimated 13 percent (and foreign aid for around 34 percent) of GDP.
Most economic development since 1999 has taken place in the trade, retail and construction sectors. The private sector which has emerged since 1999 is mainly small-scale. The industrial sector remains weak and the power grid unreliable – a key constraint.
The United Nations Interim Administration Mission in Kosovo (UNMIK) introduced an external trade office and customs administration on September 3, 1999, when it established border controls in Kosovo. All goods imported to Kosovo face a flat 10% duty. These taxes are collected at all Tax Collection Points at Kosovo's borders, including that between Kosovo and Serbia. UNMIK and Kosovo institutions have signed free-trade agreements with Croatia
, Bosnia and Herzegovina
, Albania
and the Republic of Macedonia
.
The euro
is the main currency of Kosovo, used by UNMIK and the government bodies. Kosovo adopted the German mark
in 1999 to replace the Serbian dinar
, and later replaced it with the euro. The Serbian dinar is still used in Serbian-populated areas (mostly in the north).
The economy has been seriously weakened by Kosovo's still-unresolved international status, which has made it difficult to attract investment and loans. The region's economic weakness has produced a thriving black market in which smuggled petrol, cigarettes and cement are major commodities. The prevalence of official corruption (and the pervasive influence of organised-crime gangs) has caused serious concern internationally.
Since 2002 the European Commission
has compiled a yearly progress report on Kosovo, evaluating its political and economic situation. For 2008 the European Commission reported a GDP growth of 5.4% – essentially due to public investment (194% growth, compared to a 10.2% decline in private investment) – but the report also noted that the unsatisfactory state of the statistical system does not allow for a comprehensive assessment of the situation.
Because of the poor economic situation, Kosovo remains highly dependent on payments from the international community and the Kosovar diaspora
. Donor-financed activities and international aid account for 7.5% of the GDP, and remittances from the diaspora (located mainly in Germany
and Switzerland
) for another 14%.
Large investments were also made by Mideast (Saudi in particular) charities, and there are concerns that these investments are used to increase the influence of radical Islam in the region.
Kosovo became a member of the World Bank and the International Monetary Fund in July 2009. Membership in the World Bank, an initiative led by Ranjit Nayak
(World Bank representative in Kosovo since February 2007), has resulted in Kosovo becoming part of the international financial system and the global market economy.
Porsche Austria opened a sales branch in Kosovo in 2008. Besides Porsche automobiles, other brands such as Volkswagen
, Audi
and Seat
will be sold in Kosovo by the same distributor (reflecting recognition of Kosovo by Austria
).
. In Kosovo there is substantially high reserves of lead
, zinc
, silver
, nickel
, cobalt
, copper
, iron
and bauxite
. There is also believed to be around 14,000 billion tonnes of lignite
. Canadian
company Avrupa Minerals Ltd has achieved the rights to a three year mining programme, which is expected to start in summer 2011. In 2005 the Directorate for Mines and Minerals and the World Bank
estimated that Kosovo had €13.5 Billion worth of minerals.
has always historically produced in Kosovo, both red and white. Currently the wine industry is successful and growing after the war in the 1990s. The main heartland of Kosovo's wine industry is in Orahovac (Rahoveci)
where millions of litres of wine is produced. The main wines produced in Kosovo include Pinot Noir
, Merlot
and Chardonnay
. Kosovo has recently been exporting wines to Germany
and the United States
.
(€ 111 million and € 5 million), Germany
and Turkey
.
Initial figures for Kosovo’s foreign trade show a net deficit of € 143.1 million for December 2007, compared with a deficit of € 133.0 million for the same period in 2006. Exports and imports for December 2007 were valued at € 13.7 million and
€ 156.8 million, respectively. This is a 155.8% increase for exports and 13.3% for imports compared with the same period in 2006.
Kosovo's principal export partners in December 2007 were Sweden (23.9%), Belgium (17.6%), Albania (8.1%),
Serbia (8.1%), Macedonia (6.2%) and Bulgaria (4.7%). Imports came primarily from Macedonia (15.2%), Serbia (12.8%), Germany (10.6%), China (6.8%) and Turkey (5.5%). EU imports were 36.5% and exports 60.1%. The Kosovar budget is over € 1 billion.
Kosovo
Kosovo is a region in southeastern Europe. Part of the Ottoman Empire for more than five centuries, later the Autonomous Province of Kosovo and Metohija within Serbia...
is a transition economy
Transition economy
A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a free market. Transition economies undergo economic liberalization, where market forces set prices rather than a central planning organization and trade barriers are removed,...
Despite substantial development subsidies, Kosovo was the poorest province of the former Yugoslavia
Socialist Federal Republic of Yugoslavia
The Socialist Federal Republic of Yugoslavia was the Yugoslav state that existed from the abolition of the Yugoslav monarchy until it was dissolved in 1992 amid the Yugoslav Wars. It was a socialist state and a federation made up of six socialist republics: Bosnia and Herzegovina, Croatia,...
. During the 1990s poor economic policies, international sanctions, little access to external trade and finance, and ethnic conflict severely damaged the already-weak economy. After the declaration of independence
2008 Kosovo declaration of independence
The 2008 Kosovo declaration of independence was adopted on 17 February 2008 by individual members of the Assembly of Kosovo acting in personal capacity and not binding to the Assembly itself...
of 2008 the situation deteriorated further; the uncertain international status of Kosovo, its widespread official corruption and the pervasive influence of organised crime made it difficult to attract investment and loans. Both unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
and poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...
rates are estimated at close to half the population.
Development from 1999 to 2007
After increases in 2000 and 2001, growth in GDP was negative in 2002 and 2003 and expected to be around 3 percent in 2004–2005, with domestic sources of growth unable to compensate for declining foreign aid. InflationInflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
was low, while the budget posted a deficit for the first time in 2004. Kosovo has a negative balance of trade; in 2004, the deficit of the balance of goods and services was close to 70 percent of GDP. Payments from persons living abroad accounted for an estimated 13 percent (and foreign aid for around 34 percent) of GDP.
Most economic development since 1999 has taken place in the trade, retail and construction sectors. The private sector which has emerged since 1999 is mainly small-scale. The industrial sector remains weak and the power grid unreliable – a key constraint.
The United Nations Interim Administration Mission in Kosovo (UNMIK) introduced an external trade office and customs administration on September 3, 1999, when it established border controls in Kosovo. All goods imported to Kosovo face a flat 10% duty. These taxes are collected at all Tax Collection Points at Kosovo's borders, including that between Kosovo and Serbia. UNMIK and Kosovo institutions have signed free-trade agreements with Croatia
Croatia
Croatia , officially the Republic of Croatia , is a unitary democratic parliamentary republic in Europe at the crossroads of the Mitteleuropa, the Balkans, and the Mediterranean. Its capital and largest city is Zagreb. The country is divided into 20 counties and the city of Zagreb. Croatia covers ...
, Bosnia and Herzegovina
Bosnia and Herzegovina
Bosnia and Herzegovina , sometimes called Bosnia-Herzegovina or simply Bosnia, is a country in Southern Europe, on the Balkan Peninsula. Bordered by Croatia to the north, west and south, Serbia to the east, and Montenegro to the southeast, Bosnia and Herzegovina is almost landlocked, except for the...
, Albania
Albania
Albania , officially known as the Republic of Albania , is a country in Southeastern Europe, in the Balkans region. It is bordered by Montenegro to the northwest, Kosovo to the northeast, the Republic of Macedonia to the east and Greece to the south and southeast. It has a coast on the Adriatic Sea...
and the Republic of Macedonia
Republic of Macedonia
Macedonia , officially the Republic of Macedonia , is a country located in the central Balkan peninsula in Southeast Europe. It is one of the successor states of the former Yugoslavia, from which it declared independence in 1991...
.
The euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
is the main currency of Kosovo, used by UNMIK and the government bodies. Kosovo adopted the German mark
German mark
The Deutsche Mark |mark]], abbreviated "DM") was the official currency of West Germany and Germany until the adoption of the euro in 2002. It is commonly called the "Deutschmark" in English but not in German. Germans often say "Mark" or "D-Mark"...
in 1999 to replace the Serbian dinar
Serbian dinar
The dinar is the currency of Serbia. An earlier currency also called dinar was used in Serbia between 1868 and 1918. The earliest use of the dinar date to 1214. Today's Serbian dinar is a continuation of the last Yugoslav dinar...
, and later replaced it with the euro. The Serbian dinar is still used in Serbian-populated areas (mostly in the north).
Post-independence (2008 to the present)
Estimates of the Kosovo unemployment rate (as of 2010) range from 40% to 60%. of the labour force. Unemployment among the Roma minority is as high as 90%. The mean wage in 2009 were $2.98 per hour.The economy has been seriously weakened by Kosovo's still-unresolved international status, which has made it difficult to attract investment and loans. The region's economic weakness has produced a thriving black market in which smuggled petrol, cigarettes and cement are major commodities. The prevalence of official corruption (and the pervasive influence of organised-crime gangs) has caused serious concern internationally.
Since 2002 the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
has compiled a yearly progress report on Kosovo, evaluating its political and economic situation. For 2008 the European Commission reported a GDP growth of 5.4% – essentially due to public investment (194% growth, compared to a 10.2% decline in private investment) – but the report also noted that the unsatisfactory state of the statistical system does not allow for a comprehensive assessment of the situation.
Because of the poor economic situation, Kosovo remains highly dependent on payments from the international community and the Kosovar diaspora
Kosovar diaspora
The term Kosovan diaspora refers to the estimated population of Kosovan people in the world migrated outside of Kosovo.Since the vast majority of Kosovans are Kosovar Albanians, the Kosovan diaspora is for the most part a section of the Albanian diaspora.Also since the Republic of Kosovo declared...
. Donor-financed activities and international aid account for 7.5% of the GDP, and remittances from the diaspora (located mainly in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
) for another 14%.
Large investments were also made by Mideast (Saudi in particular) charities, and there are concerns that these investments are used to increase the influence of radical Islam in the region.
Kosovo became a member of the World Bank and the International Monetary Fund in July 2009. Membership in the World Bank, an initiative led by Ranjit Nayak
Ranjit Nayak
Ranjit Nayak is the World Bank Representative in Kosovo.Nayak saw through Kosovo’s independence in February 17, 2008 and the enforcement of its constitution in June 2008. Nayak played an important role in facilitating the process of Kosovo’s membership at the World Bank...
(World Bank representative in Kosovo since February 2007), has resulted in Kosovo becoming part of the international financial system and the global market economy.
Porsche Austria opened a sales branch in Kosovo in 2008. Besides Porsche automobiles, other brands such as Volkswagen
Volkswagen
Volkswagen is a German automobile manufacturer and is the original and biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda marques and the truck manufacturer Scania.Volkswagen means "people's car" in German, where it is...
, Audi
Audi
Audi AG is a German automobile manufacturer, from supermini to crossover SUVs in various body styles and price ranges that are marketed under the Audi brand , positioned as the premium brand within the Volkswagen Group....
and Seat
SEAT
SEAT, S.A. is a Spanish automobile manufacturer founded on May 9, 1950 by the Instituto Nacional de Industria , a state-owned industrial holding company....
will be sold in Kosovo by the same distributor (reflecting recognition of Kosovo by Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
).
Natural Resources
Kosovo is rich in natural resourcesNatural Resources
Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...
. In Kosovo there is substantially high reserves of lead
Lead
Lead is a main-group element in the carbon group with the symbol Pb and atomic number 82. Lead is a soft, malleable poor metal. It is also counted as one of the heavy metals. Metallic lead has a bluish-white color after being freshly cut, but it soon tarnishes to a dull grayish color when exposed...
, zinc
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...
, silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
, nickel
Nickel
Nickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...
, cobalt
Cobalt
Cobalt is a chemical element with symbol Co and atomic number 27. It is found naturally only in chemically combined form. The free element, produced by reductive smelting, is a hard, lustrous, silver-gray metal....
, copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
, iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...
and bauxite
Bauxite
Bauxite is an aluminium ore and is the main source of aluminium. This form of rock consists mostly of the minerals gibbsite Al3, boehmite γ-AlO, and diaspore α-AlO, in a mixture with the two iron oxides goethite and hematite, the clay mineral kaolinite, and small amounts of anatase TiO2...
. There is also believed to be around 14,000 billion tonnes of lignite
Lignite
Lignite, often referred to as brown coal, or Rosebud coal by Northern Pacific Railroad,is a soft brown fuel with characteristics that put it somewhere between coal and peat...
. Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
company Avrupa Minerals Ltd has achieved the rights to a three year mining programme, which is expected to start in summer 2011. In 2005 the Directorate for Mines and Minerals and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
estimated that Kosovo had €13.5 Billion worth of minerals.
Wines
WineWine
Wine is an alcoholic beverage, made of fermented fruit juice, usually from grapes. The natural chemical balance of grapes lets them ferment without the addition of sugars, acids, enzymes, or other nutrients. Grape wine is produced by fermenting crushed grapes using various types of yeast. Yeast...
has always historically produced in Kosovo, both red and white. Currently the wine industry is successful and growing after the war in the 1990s. The main heartland of Kosovo's wine industry is in Orahovac (Rahoveci)
Orahovac
Orahovac is a town and municipality in western Kosovo, in the District of Đakovica.-Name:Its Serbian name stems from the Serbian word orah , meaning "walnut"....
where millions of litres of wine is produced. The main wines produced in Kosovo include Pinot Noir
Pinot Noir
Pinot noir is a black wine grape variety of the species Vitis vinifera. The name may also refer to wines created predominantly from Pinot noir grapes...
, Merlot
Merlot
Merlot is a darkly blue-coloured wine grape, that is used as both a blending grape and for varietal wines. The name Merlot is thought to derive from the Old French word for young blackbird, merlot, a diminutive of merle, the blackbird , probably from the color of the grape. Merlot-based wines...
and Chardonnay
Chardonnay
Chardonnay is a green-skinned grape variety used to make white wine. It is originated from the Burgundy wine region of eastern France but is now grown wherever wine is produced, from England to New Zealand...
. Kosovo has recently been exporting wines to Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Trade
The Republic of Macedonia is Kosovo's largest import and export market (averaging € 220 million and € 9 million respectively), followed by SerbiaSerbia
Serbia , officially the Republic of Serbia , is a landlocked country located at the crossroads of Central and Southeast Europe, covering the southern part of the Carpathian basin and the central part of the Balkans...
(€ 111 million and € 5 million), Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
.
Initial figures for Kosovo’s foreign trade show a net deficit of € 143.1 million for December 2007, compared with a deficit of € 133.0 million for the same period in 2006. Exports and imports for December 2007 were valued at € 13.7 million and
€ 156.8 million, respectively. This is a 155.8% increase for exports and 13.3% for imports compared with the same period in 2006.
Kosovo's principal export partners in December 2007 were Sweden (23.9%), Belgium (17.6%), Albania (8.1%),
Serbia (8.1%), Macedonia (6.2%) and Bulgaria (4.7%). Imports came primarily from Macedonia (15.2%), Serbia (12.8%), Germany (10.6%), China (6.8%) and Turkey (5.5%). EU imports were 36.5% and exports 60.1%. The Kosovar budget is over € 1 billion.
See also
- Central Bank of KosovoCentral Bank of KosovoThe Central Bank of the Republic of Kosovo , formerly known as the Banking and Payments Authority of Kosovo , is the central bank of Republic of Kosovo based in Pristina.The bank's functions include:* regulating payments and settlements systems....
- History of KosovoHistory of KosovoIn antiquity, the Kosovo region in the Balkans was known as Dardania and from the 1st century AD it formed part of the Roman province of Moesia. From c. 700 to 1455, the Kosovo region became part of the Bulgarian Empire, the Byzantine Empire and then the Serbian medieval states, notably Raška...
- List of banks in Kosovo
- Ranjit NayakRanjit NayakRanjit Nayak is the World Bank Representative in Kosovo.Nayak saw through Kosovo’s independence in February 17, 2008 and the enforcement of its constitution in June 2008. Nayak played an important role in facilitating the process of Kosovo’s membership at the World Bank...
- List of companies of Serbia#Kosovo
External links
- http://www.tradeboss.com/default.cgi/action/viewcompanies/inlocationid/18901/inlocation/Serbia_and_Montenegro_Kosovo/
- http://www.dmoz.org/Regional/Europe/Serbia/Kosovo/Business_and_Economy/