Bruto Local Product Fall Increases Unemployment, Poverty

Kosovo's economy, according to the World Bank, will contract for -8.8 percent this year, which has resulted in Bruto Local Production in the first six months of this year falling for 9.28 percent.

The decline in that figure, according to a GAP Institute research, has caused the <x0-producing internal production in Kosovo to mark the biggest decline since post-war”.

Bruto Local Product (BPV) is the main and most important macroeconomic indicator in the national account system, which represents the final results of production in all the activities of residential production units.

Bruto Product is calculated according to three elements: the approach of production, the approach of expenses and access of revenues to the Republic of Kosovo.

According to official data, BPV for 2019 was above 7.1 billion euros, while BPV per capita was 3,566 euros, while real economic growth was 4.2 percent.

In addition to Kosovo, World Bank data shows that Western Balkan countries will also suffer economic decline this year as a result of COVID -19.

Fever: Kosovo in economic shock

Bruto Product will be about a billion euros less this year. Despite this decline, macroeconomic professor Driton Qehaja says that Kosovo with current figures is not classified in crisis, but in economic shock.

But if such a situation continues next month, Kosovo, according to him, will face economic crisis.

So, deterioration in all economic variables, as in the real sector, the financial sector and the government. In this case we also understand revenues, government spending and capital expenditures”, Qehaja told Radio Free Europe.

Ramos: Consumer decline has reduced BPV

The next economy professor, Berim Ramosaj, says that with the economic downturn, local and international capital investments are reduced, therefore the level of development financing decreases. The decline of these parameters affects increasing unemployment and poverty rates.

When there are fewer investments, distribution becomes more problematic because when it is not produced there is nothing available. Most states, this loss is trying to cover with various forms, whether in international debt, only to help citizens and businesses”, Ramosaj said.

Incomes of economic activities that were mostly affected by the drop in spending are the construction industry with 47 percent, followed by trade, transport, accommodation, and gastronomial by 24 percent. Yes, and during the first six months this year, industries declared about 594m euros, or 11 per cent less circulation in the Kosovo Tax Administration, than in the same period last year.

Professor Qehaja says Kosovo government must find forms to help Producer companiesTo improve Bruto Product.

Agregate requests should not be spent on imported goods. Although the government finds it difficult to determine the way consumers buy, since the market is free, but at least at this time pandemic, it is needed through various policies, to support local companies. Because worsening the situation of the production industry brings job losses, a problem that affects the deterioration of other economic parameters”, Qehaja said.

Support for the production industry has also called for the Kosovo Producer Club. This Club has called on the Government of Kosovo to free the State Value Tax for purchase of local products and services.

According to this club, release from VAT would directly affect the increased consumption of local products.

In Kosovo, two VAT rates are set: standard 18 per cent and reduced 8 per cent rates.

Otherwise, the resulting losses to Kosovo's economy -- from March of this year, caused by the pandemic, according to business representatives -- are estimated to be one billion euros, while by the end of the year, more than 30,000 jobs could be lost.