IMF: Vaccination and diaspora can boost economy 5-6 percent in Kosovo

Population vaccines in Kosovo and reopening borders could lead to economic growth of up to 6 percent by 2021, the International Monetary Fund (FMN) predicted.

According to the chief of this IMF team that made the report for Kosovo, Gabriel Di Bella, growth could occur if the vaccine programme is successful.

Also, an reopening of borders enabling diaspora to arrive in the summer season was seen as a boost in economic activity.

If realised, economic benefits in 2021 must compensate for losses of 4 to 5 per cent caused by pandemic in last year”, he said.

On the other hand, increasing the number of infections as a result of new variants of COVID-19 are projected to jeopardise economic growth.

According to the IMF, strengthening social infrastructure, promoting digitalisation and gradual reduction of pollution and carbon tracks in Kosovo will contribute to faster growth of human capital, productivity and the preparation of the economy for post-Indemecim challenges.

The inability of businesses in Kosovo to exercise their activity normally last year affected citizens' employment and income, thus directly affecting the economic downturn.

According to the Kosovo Central Bank (BQK), for 13 years, Kosovo has accepted nearly nine billion euros of remittances.

In Kosovo, in 2020, the value of remittances, according to BQC data, was around 940m euros. In the first quarter of this year, however, the value of remittances totals over 200m euros.

Within the last two weeks alone, according to official information, over 40,000 citizens from the diaspora have entered Kosovo through Pristina International Airport “Adem Jashari”.

As of June 22, more than 140,000 doses of vaccines against Kosovo have been administered in Kosovo COVID-19.

Kosovo continues to be one of the countries with the smallest number of vaccines in Europe.

The government has said that by the end of the year it plans to vaccinate 60 percent of the population.

The growth rate of up to 6 percent results in faster economic recovery than the initial forecasts of the pandemic show, says Arrian Zeka, chief executive officer at the American Economic Ode in Pristina. Zeka also says that in this growth, the inevitable will affect the arrival of citizens living abroad for holidays in Kosovo.

Based on the practices of past years, the coming diaspora will reflect on increased economic activities and, of course, a thorough increase in circulation among private companies. Consequently, even at a more satisfactory rate of economic development, beyond what the World Bank originally predicted, which seems to be less optimistic than what is envisioned by the International Monetary Fund”, Zeka points out to Radio Free Europe.

The World Bank's latest report has said that growth in countries with low income economies this year is projected to be slower in the past 20 years. These countries with this economy are expected to grow 2.9 percent in 2021 before they reach 4.7 percent in 2022.

Economics Professor Muhamet Mustafa, a senior adviser at the Riinvest Institute at the same time, points out that with the forecast for economic growth of up to 6 percent, Kosovo will return to the level it was in late 2019. However, he says there are indicators of improving the economic situation. Apart from the diaspora's arrival, Mustafa says there is also increased circulation and export of goods.

But will this pace continue over the next few years, it also depends on increasing investments in economies, products and new services. And this requires a much better business environment, in terms of law enforcement, fighting corruption and in terms of political stability and the image of the country. It means, we need a series of interrelated factors that we need to ensure to get to a degree where development will be sustainable. Sustainable development is about 7 percent for more than a decade, so that Kosovo is at a more stable economic and qualitative level than it is now”, Mustafa points out.

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. By 2020, this growth was projected to be 4.2 percent, but as a result of pandemic, Kosovo's economy has dropped to 7 percent.

Economic growth in Kosovo also depends on public investments, says Arrian Zeka, under which the government has not yet made public the value of these expenditures.

The “is not very clear from what has been presented by the government, what the volume of public spending will be, to what extent we will see infrastructure projects in which it will be invested. This seems still unclear, of course knowing that budget tools have had to be directed in other directions, primarily in support of small and medium-sized enterprises hit by pandemic, and of course citizens infected by pandemic”, he points out.

The current economic situation, the minister of finance and transfers, Iron Murati, has called it very promising and good. In a pre-memberial hearing in the Kosovo Assembly, he has indicated that there is a return to economic activity and, with the arrival of the diaspora, with the spending of those means accumulated during the era of pandemic, according to him, Kosovo is expected to have the best economic performance in the last two decades, in terms of revenues, therefore economic development.