Overview

Strategy

Since 1999, the World Bank Group (WBG) has provided to Kosovo and/or managed roughly US$440 million through more than 30 operations, including trust funds.

All Bank-supported projects prior to Kosovo’s joining the WBG in 2009 were financed through grants from a variety of sources, principally the Bank’s net income, the Trust Fund for Kosovo, the Post-Conflict Fund, and the International Development Association (IDA). Kosovo is currently still eligible for IDA credit financing (on blend terms) due to its post-conflict fragility. As of October 2018, the active IDA lending portfolio amounted to roughly US$174.42 million across seven projects in the areas of energy, education, agriculture, health, competitiveness, water, and the information and communications technology (ICT) sector. 

The main strategic objective of the WBG Country Partnership Framework (CPF) 2017–21 is to assist Kosovo in moving on a path toward more sustainable, export-oriented, and inclusive growth in order to provide its citizens more opportunities for a better life. The CPF has three focus areas: (i) enhancing conditions for accelerated private sector–led growth and employment, (ii) strengthening public service delivery and macro-fiscal management, and (iii) promoting reliable energy and stewardship of the environment.

Key Engagement

World Bank–financed projects have been designed to strengthen the business climate and improve competitiveness. 

Active Projects (US$, Million)

• Kosovo Digital Economy Project (17.31)
• Agriculture and Rural Development Project (42.15)
• Energy Efficiency and Renewable Energy Project (31.0)
• Kosovo Health Project (25.5)
• Education System Improvement Project (11.0)
• Water Security and Canal Protection Project (24.5)
• Competitiveness and Export Readiness Project (15.27)

The active portfolio includes an Energy Efficiency and Renewable Energy Project, which aims to reduce energy consumption and fossil fuel use in public buildings and to support Kosovo in enhancing the policy and regulatory environment for renewable energy and energy efficiency.

Last Updated: Oct 11, 2018

Economy

Recent Economic Developments

The Kosovar economy has grown consistently above the Western Balkan average in the post-global financial crisis period, albeit from a low base. GDP per capita grew from US$1,088 in 2000 to US$3,877 in 2017. Despite this tripling of income per capita over the past 17 years, Kosovo remains the third-poorest country in Europe. 

During 2009–17, real GDP grew on average by 3.5%. This strong growth performance is expected to continue in 2018 with a projected growth rate of 4.2%, driven by higher public investment and service exports and supported by consumption. Kosovo continues to be the fastest-growing economy in the Western Balkans.

The non-tradable sectors dominate output and employment in Kosovo. Services represented the largest sector in the economy, with a share of value added at 54% of GDP during 2009–17. Industry is small by regional standards at 16.8% of GDP, of which manufacturing is about 10%. The agriculture sector remains relatively large at 11% of GDP. 

The current account deficit is expected to rise slightly from 6.6 to 6.9% of GDP in 2018 due to a decline in exports of goods despite the fast rise in service exports. 

Kosovo is a euroized economy, and its headline macro-fiscal policies continue to be stable. The fiscal rules in place are supported by a healthy banking sector. The fiscal deficit, according to the fiscal rule definition, is expected to be 1.8% of GDP at end-2018, driven by higher untargeted social protection spending and higher public investment. 

The stock of public debt is low but has been rapidly increasing in recent years. Public and publicly guaranteed debt are estimated at 17.2% of GDP in 2018, the lowest debt level in the Western Balkans, offering the country room to borrow on concessional terms for productive investments with a high rate of return. Half of the public debt is external, mainly from international financial institutions. 

The financial sector in Kosovo, which is dominated by the banking sector, is healthy and sound. Banks are well capitalized and profitable, with high capital adequacy ratios and a low and declining ratio of nonperforming loans at 2.7% in July 2017. Both credit and deposits have continued to grow at an accelerated rate in the past several years, reaching a year-on-year growth of 11.5% and 6.3%, respectively, in 2017.

Economic Outlook

Kosovo’s medium-term growth outlook is positive and on an upward trend but needs a stable political environment and better business climate to attract productive investments. The near-term growth is expected to continue to be driven by investment and consumption, including investment in the energy sector to build new generation capacity as well as new donor-financed projects under the investment clause of the fiscal rule. A better absorption capacity of public investment projects could lead to slightly higher growth, especially in the 2019–21 period.

Last Updated: Oct 11, 2018

Project Spotlight

Real Estate and Cadastre Project. Tens of thousands of properties were left damaged, destroyed, or abandoned by the 1999 conflict in Kosovo, and property transactions in the country were often unregistered due to weak services. This is changing, however, through Kosovo’s Real Estate Cadastre and Registration Project (RECAP), which is aimed at improving tenure security and developing land and property markets in the country. Now, ownership is being registered and rights to property guaranteed. In addition to the legacy of the conflict, in the past two decades many cities in Kosovo have also experienced rapid, unplanned urban expansion that has included informal settlements and illegal construction. The Government has introduced a program for landowners to legalize their property rights, and municipalities are working to integrate the new developments into existing plans. 

RECAP, financed with US$12 million from the World Bank, has been assisting the Government in updating cadastral information and building a geospatial data infrastructure. Under the Bank-financed project, municipal cadastre offices around Kosovo have been renovated and equipped to provide more efficient services. The time needed to register a transaction has dropped from 30 days before RECAP to 10 days today, increasing market efficiency and improving Kosovo’s rank for registering property in the Doing Business report from 73 in 2012 to 34 in 2018.

A new IT system has been launched in almost all municipal cadastral offices and a national Geoportal established, with a growing number of users. As part of the project, cadastre staff has received training in management, customer service, and technical skills. The project also had an active gender component to raise awareness of the importance of women’s property rights. RECAP closed in June 2018. A new project is under preparation that will build on the progress of RECAP and make important investments in IT and geospatial infrastructure, focusing on improving service delivery to citizens and businesses in Kosovo.