Kosovo Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economical overview

Kosovo is one of Europe’s poorest countries, with a great dependence on transfers from abroad. Unemployment is high and the level of education is low. B ehind poverty is also war, corruption and mismanagement.

Agriculture and mining have been the basis of the economy and accounted for the majority of the country’s income and employment. The conditions for both are really good (large areas with relatively fertile soil and rich natural resources) but the lack of modern equipment, money and knowledge has led to poor returns. The domestic industry is weak and exports are modest.

Countryaah.com: Major imports by Kosovo, covering a full list of top products imported by the country and trade value for each product category.

The black economy is extensive, although there is no precise data. In the wake of the war, activities such as drug trafficking (the so-called Balkan route goes through Kosovo), cigarette smuggling, prostitution and human trafficking have flourished.

During the Yugoslav era, Kosovo received large contributions from the richer parts of the country, but the infrastructure remained undeveloped. With the collapse of Yugoslavia, the grants disappeared, and the war in the late 1990s worsened the economic situation. Today, Kosovo’s economy is completely dependent on the outside world. The money emigrants send home accounts for about 15 percent of GDP. International aid has declined but still accounts for about 5 percent. Among the countries in Europe, only Ukraine and Moldova are considered even poorer.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including RKS which represents the country of Kosovo.

Kosovo became a member of the World Bank and the International Monetary Fund (IMF) in 2009. The country has received loans under two-year so-called standby agreements from the IMF. When the corona pandemic broke out in the spring of 2020, Kosovo also received emergency loans as the economy was predicted to be hit hard by reductions in tourism, trade, referrals and direct investment.

The government says it will prioritize economic reforms in order to stimulate industry and attract business and investment. At the same time, the hopes that an independent Kosovo could more easily attract new capital have been partly to shame. Foreign investors are hesitant, much because of widespread corruption (see Democracy and Rights), whimsical energy supply (Natural Resources, Energy and the Environment), extensive bureaucracy and a shortage of educated staff (but at the same time a low wage level).

Nevertheless, Kosovo has had some successes in its path towards a market economy. Among other things, the country, with international assistance, has been able to privatize most of the state enterprises.

Kosovo is highly dependent on imports and has an extremely large trade deficit. The value of exports is only around 12 percent of imports. The most important export goods are iron and steel. Alongside official foreign trade, extensive trade and smuggling of drugs, cigarettes and people continues.

Kosovo joined the Cefta (Central European Free Trade Association) regional free trade organization in 2007. As a result, Kosovo is formally bound to comply with World Trade Organization (WTO) regulations, without itself being a WTO member. But two of Cefta’s members, Serbia and Bosnia-Herzegovina, do not recognize Kosovo’s independence (see Foreign Policy and Defense), which has contributed to several “trade wars” with neighboring countries.

When central authorities took control of two border crossings in Serbian-dominated northern Kosovo in 2011, Serbia imposed an import ban on Kosovo goods, prompting immediate countermeasures. The crisis was dampened a few months later when both parties reached a tariff settlement. In the fall of 2013, Kosovo and the present Northern Macedonia introduced trade embargoes against each other, since the Macedonians imposed protection duties on wheat from Kosovo.

At the end of 2018, Kosovo first introduced tariffs of 10 percent on all goods from Serbia and Bosnia – and then soon increased the tariff to 100 percent. This was a reaction to Serbia’s failure to prevent Kosovo from joining the international police organization Interpol. In the spring of 2020, the extreme tariff was lifted, but not long after that new restrictions were expected, which are expected to hinder trade exchange.