Economic recession warned in Kosovo

That's what Free Europe Radio, Pristina University Economics Professor Majid Bektashi, and the chairman of the Kosovo Economic Ode, Lulzim Rafuna, say.

The recession is described as contracting the business cycle, resulting in a general decline in economic activity.

Real economic growth in Kosovo, according to Bektash, is not more than 2 to 3 per cent, and this growth, he adds, “is not enough to escape recession”.

The problem is that now inflation by failing to stabilise with salary indexing, whether in the public or private sector, is causing a lower demand that could lead to recession”, Bektas says.

Kosovo, according to the European Bank for Reconstruction and Development data (BERZH), in 2022 it marked economic growth of 3.5 percent, and as much is expected to be in this year.

Germany has announced recession in the economy this week as a consequence of inflation.
Germany's inflation has affected 7.2 percent in April.

The German economy, according to the Statistics Office, has contracted by 0.3 per cent in the January-March period and has had a contraction of 0.5 per cent in the last three months of last year.

Kosovo Economic Ode Chairman Lulzim Rafuna, late December last year, in an interview for Radio Free Europe had said that if the European market enters recession, it automatically reflects on Kosovo.
Now when Germany's economy is in recession, Rafuna says Kosovo must be very cautious.

The moment a European country has marked recession, history has shown us that it reflects on Kosovo as well. We should also be careful to follow the trend carefully so that it can be more easily passed”, he tells Radio Free Europe.

Rafuna does not want to comment on what measures Kosovo institutions must take to cope more easily if the country enters recession.

In Kosovo, in April, according to the Statistics Agency, inflation has been at 6.3 percent higher compared to the same period last year.

Price increases are noted in food products, fuels, transport, and other products.

While the average inflation rate in 2022 has been nearly 12 percent.

With high inflation, Kosovo is facing the end of 2021.

Regarding the prospect of inflation in Kosovo, the Kosovo Central Bank predicts inflation in 2023 will slow to 5.4 percent.

Increasing inflation elsewhere in the world has greatly contributed to the pandemic of the Coronaviurs and Russia's war in Ukraine.

In reducing the money supply on the Kosovo market, according to Professor Bektash, the low level of wages in Kosovo affects the state of the Western Balkans.

“We haven't set a minimum wage two years yet, he says.

The Kosovo Assembly, on 14 June last year, has voted in principle a bill that paves the way for the growth of the minimum wage -- from 130-170 euros as it currently is, to 264 euros gross, or 250 euros net.

This bill has not yet been adopted in the Kosovo Assembly. According to the European Statistics Agency (European), Kosovo is the country with the lowest minimum wage in Europe.

The average salary in Kosovo in 2021 was 484 euros.

“This level of wages causes lowering citizens' purchasing capability that causes recession in the national economy”, Bektas says.

Bektash says that in the period when the arrival of the Kosovo diaspora is expected there is no recession, as there is an increase in the amount of money in the economy.

But after the diaspora's arrival at the end of the summer months, it could appear.

“Noninvestment in the streets, preservation of the state budget by keeping the money frozen, not investing it, could cause a lack of money that will be expressed in the construction and trade sector”, he says.

The construction and trade sector are two of the sectors with the largest economic activity in Kosovo. According to Kosovo Central Bank data, last year alone, remittances have seized over 1.2 billion euros.