Kosovo dependent on diaspora, exile money detects economic growth

The economy continues to be dependent on the money the diaspora sends to Kosovo. The money sent and their arrival on vacation in Kosovo are being cited as a major factor in economic growth of 7.1 percent this year from -5.3 percent last year.

The latest World Bank report, released on October 6th, says that economic activity in Kosovo during the year 2021 is expected to expand to 7.1 percent, growth driven by diaspora visits and fiscal support measures. In the medium term, according to the report, economic growth will be conditional on accelerated the vaccine process against COVID-19 and pandemic management.

Economics Professor at UBT College, at the same time Central Bank Governor Hashim Rexhepi, considers that this level of economic growth is encouraging because economic benefits in 2021 must compensate for losses caused by pandemic in the past year, when Kosovo has faced pandemic and restrictive measures. The diaspora's revenues, according to him, have consistently had great impact on Kosovo's economy.

“The diaspora change in Kosovo has been steadily enormous. The massive arrival of citizens this year has made remittances or revenues from diasporas conspicuously larger than in the years before. So the impact on economic growth has also been felt in this period. The revenues our fellow citizens have brought have caused consumption to rise in Kosovo”, Rexhepi tells Radio Free Europe.

According to Kosovo Central Bank data, the value of remittances in Kosovo for the January-August 2021 period has reached 749.6m euros, or 141.2m euros more than the same period last year, where the total value of remittances was 608.4m euros. But no official data on how much citizens from the diaspora have spent on vacation in Kosovo.

Kosovo Customs data also speaks of increased revenues this year. In the January-September period, Dogana has managed to register over one billion euros, or 33 per cent more than in the same period last year.

Rukiqi: Economic growth is not sustainable

Even the chairman of the Kosovo Economic Ode, Berat Rukiqi, tells Radio Free Europe that the level of consumer growth has determined economic growth. But consumption according to it is not a sustainable source of economic growth.

“We should not have any excessive enthusiasm for economic growth this year, as at the same time we have inflation growth indicators. This economic growth can easily disappoint us next year if we continue the trend of price hikes”, Rukiqi says.

Average economic growth in Kosovo for years has behaved up to 4 per cent. According to Kosovo Central Bank's annual reports, Kosovo's economy in 2019 had seen real growth of 3.9 percent. For 2020 this growth was projected to be 4.2 percent, but as a result of pandemic and restrictive measures, Kosovo's economy has been reduced to -5.3 percent, according to the World Bank.

But Hashim Rexhepi says optimistic that the level of economic growth in Kosovo will continue, as production companies with their products have managed to penetrate the European Union as well. The Kosovo government, according to him, must find ways to attract international investments.

“So I consider that the preconditions are creating for our economy to move faster. However, when we talk about economic growth and its overall impact on Kosovo's living standard, preconditions must be created in attracting foreign investments because they affect exclusively economic growth, and that we have a two-way economic growth, if we want to achieve the level of economic development that countries in the region have, and not talk about European Union countries”, Rexhepi says.

Meanwhile, Berat Rukiqi estimates that sustainable sources of economic growth are investments in the private sector and export growth.

Economic growth in the region

According to the latest World Bank report, some of the countries in the region have also seen economic growth this year.

Economic recovery in Albania in 2021 is stronger than predicted, while economic activity has returned to 7.2 percent. Serbia's economy during this year has also marked growth of about 6 per cent.

Following the deep recession of 2020, Montenegro's economy is recovering faster than anticipated, with a projected double growth rate for this year.

Economic growth in Bosnia and Herzegovina has reached 4 percent, while growth in northern Macedonia has reached 3.5 percent.