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Economic Monitor Kosovo

The pandemic had a strong negative impact on the Kosovar economy. However, strong fiscal policy support, high remittances from the large Kosovar diaspora, as well as monetary support measures mitigated the shock.

  • Kosovo
WA 1 | September 2021
Macroeconomic Analyses and Forecasting

Overview

  • 2020: strong negative effect of COVID-19 on diaspora-linked tourism receipts and investment
  • But: negative shock was softened by strong fiscal support, higher remittances and CBK’s measures to support liquidity
  • As a result, GDP declined by 5.3% in 2020, a shorty reported by Agency of Statistics
    2021: GDP to increase by over 6%, driven by consumption, investment and net exports
  • Low inflation in 2020 on the back of low import prices (incl. energy); inflation to remain low in 2021
  • Slight real effective appreciation in 2020; however, a drop in wages helped to maintain the competitive edge for Kosovo
  • Significant increase in current account deficit in 2020 (7.5% of GDP), mainly due to low exports of services (esp. tourism receipts); reduction of deficit expected for 2021
  • Strong fiscal response to crisis led to increase in budget deficit to 7.7% of GDP in 2020; slight reduction in 2021 expected, major fiscal consolidation to take place in 2022

Topics

  • FDI trends in the context of the pandemic
  • Energy system of Kosovo
  • Fiscal policy: fiscal rules, public debt and budget expenditures & revenues

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