Economic growth slows down in Kosovo

The slowdown in the country's economic growth, according to experts, is the result of stagnation in investments, including public capital projects. The low dynamics of the implementation of capital projects, according to the executive, is the cause of the slowdown of work by economic operators due to the increase in the prices of construction materials. According to economists, economic growth will be similar next year as well

The economic growth of Kosovo has slowed down in the third quarter of 2022. The reason for this is the stagnation in the realization of investments, which affected the economic growth to be only 2 percent. According to the Central Bank of Kosovo (CBK), the year is expected to end with economic growth of 2-3 percent.

Even though this economic growth is 8.7 percent smaller than last year, according to Edison Jakurt, PhD student in economics, the difference is also the cause of the comparative basis.

According to him, in 2021, the comparative basis was 2020, where there was an economic contraction of -5.3 percent, while the year 2022 has a comparative basis in 2021, which had an increase of 10.7 percent.

"The structure of Kosovo's economy has not changed at all. Last year we had economic growth of 10.7 percent. If that increase was because the structure of the economy has changed, then the economy for 2022, when there was high inflation, would be much more stable. This has not happened. We have had an economic recovery due to the opening", Jakurti emphasized. "Let's say, a person has an income of 100 euros and if he earns only 10 euros more, then we say that this person's income has increased by 10 percent. But if a person has an income of 1000 euros, and it increases by 10 euros, then we say that the increase is only 1 percent", he clarified.

The low dynamics of the implementation of capital projects, according to the executive, has occurred due to the slowdown of work by economic operators due to the increase in the prices of construction materials.

According to the financial report of the Ministry of Finance, for nine months, capital expenditures reached the value of 158 million euros, which is the realization of only 21 percent of the budget for this category.

"It should not be forgotten that if we look at the components of the gross product, the sector that has stalled is that of investments, and this is one of the reasons why this slowdown has occurred. It was a domino effect on one side and that the companies did not fulfill the contracts with the conditions as they were before inflation", Jakurti said.

Based on the forecasts of the International Monetary Fund and the World Bank, as well as that of Central Kosovo, the economic growth will be similar next year as well.

"It will be similar next year as well, since in 2022 we have not seen any paradigmatic change in our economy, but we see that exports increase, but on the other hand, the trade deficit increases, our imports increase, which have set a record this year", he said.

Regarding the structures of imports, he said that they, together with the origin, are problematic.

"The structure is problematic because we import things that could be produced in Kosovo and at an affordable cost", he emphasized.

According to the data of the Statistics Agency for the month of November, the trade deficit was 401 million euros or 11 percent higher than in November last year.

During the last month alone, Kosovo imported goods in the summer of 475 million euros, while it exported about 74 million.

Until September, according to CBK, the import of goods reached 4.15 billion euros or an increase of 24.6 percent. There was also an increase in the export of goods. For nine months, goods worth 688 million euros were exported, or 27.1 percent more than last year.

According to Jakurt, what the Government should do is to change fiscal policies, which has not happened so far, according to him.

"We have seen that the minimum wage increase, which should have happened, has stalled. Along with the salary increase, there was also another component, that for incomes up to 250 euros there is tax exemption. I think this would be good to do," he said.

But, according to him, fiscal reforms should be deeper. He also mentioned the lack of tax on dividends, which Kosovo does not have.

"Corporate income tax is very small, this should be increased", Jakurti added.