The main issues preventing Kosovo's economic development

• Author: Demir Lima
• Position: Fama College, Kosovo
• Pages: 145-152

Vol. 3 No. 3

November 2017

ISSN 2410-3918

Acces online at www.iipccl.org

145

Academic Journal of Business, Administration, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

The main issues preventing Kosovo’s economic development

Dr. Demir Lima

Fama College - Kosovo

Abstract

This study provides an analysis of several problematic factors preventing Kosovo’s

economic development. Several sectors that could have been the main pillars of

economic development, such as manufacturing, energy, mines and minerals, and

other economic sectors have been neglected from the development by domestic

institutions or were used clandestinely by certain interest groups, whose focus was

not in the development of the country but rather their personal gain. Trade remained

the preferred activity throughout these years, which cannot be considered a benefi cial

sector for economic development, as much as manufacturing, which remains to date

as Kosovo’s most underdeveloped sector. As long as Kosovo’s exports cover only

12% of total imports, no economic growth can be expected. Kosovo’s failure to a ract

strategic investors in years, which could open new jobs, has also contributed its lack

of su cient economic development. Thus, the most concerning issue during this

period is the decline in foreign direct investments, which were expected to increase

a er the declaration of independence.

In the lack of a long-term development strategy for certain sectors or priority activities,

such as mines, energy, industry etc., there is no progress in the country's economic

development. The main issue is that we should only favor those activities or identify

segments where we have competitive advantages compared to other countries.

Keywords: Economic issues, Kosovo’s economy, FDI, Doing business, Strategic

investors.

Introduction

In 2016 Kosovo’s economy marked a higher activity compared to the previous

year. According to the estimates of the Kosovo Agency of Statistics for the fi rst

three quarters of 2016, the nominal GDP value reached 4.25 billion Euros, which

in real terms constitutes an average annual increase of 3.5%. The overall activity

in the country was mainly driven by the increased domestic demand, whereas

net exports had a negative impact in the economic growth rate. In terms domestic

demand, the real growth of the country’s economy in the fi rst nine months of 2016

is estimated to be the result of increased consumption and private investments,

whereas public consumption and public investments are estimated to have declined.

The increase in bank lending and increased infl ows of external transfers in the form

of remi ances and compensation of workers resulted in the increase of private

consumption during the fi rst nine months of 2016. In addition, the increase of public

sector salaries and pensions in the country had a full e ect in 2016, resulting in