Kosovo's economic growth in thepast decade has been solid, yet, with a gross domesticproduct (GDP) per capita of1,760, the country remains oneof the poorest in Europe. The end of the conflict, outputwas growing at double-digit rates, driven by thedonor-funded reconstruction efforts. Since 2005, annualgrowth has decelerated to below 5 percent. However, theother countries in Southeast Europe have been growingfaster, so the income gap has widened. Kosovo's economywould need to more than double its growth rate to 10 percentper annum over the next decade to reach Albania'sincome level (assuming Albania's economy continues togrow at 5.5 percent annually over this period). To reachMontenegro's current GDP per capita level of about 5,700, the economy would have to grow at 12 percent perannum for an entire decade. At the same time, Kosovo has theweakest employment track record in Europe: the unemploymentrate has reached 48 percent and the employment rate isextremely low (26 percent). Consequently, poverty remainspersistent and widespread (though shallow) with 45 percentof the population estimated to consume less than thenational poverty line, while 17 percent are extremely poor.Much of the economic progress in the recent period has beenbased on donor aid and remittances, which cannot be thefoundation of a sustainable economic strategy. Kosovo hasthe potential to shift toward faster, private sector ledgrowth. Kosovo's products have free market access tothe European Union (EU) and Central European Free TradeAgreement (CEFTA) countries, so exports could become animportant pillar of growth. Unleashing that potential willinvolve bringing on line three production factors that arenow sitting partially idle: labor, land, and energy andminerals. The encouraging news is that unleashing thispotential is within the country's own grasp, becausemost of the current obstacles are of a policy nature.However, simultaneous action will be required on severalpolicy fronts.
PDF
download
878987797
028-85220240
