The truth of economic growth

2023-05-21 09:19:00, Kosova & Bota CNA

Officials of the Government of Kosovo are often praised for the success the country has achieved in terms of economic growth.

During this week, the data of the European Bank for Reconstruction and Development (EBRD) showed that Kosovo has the highest economic growth in the region.

According to this international financial institution, Kosovo is expected to have economic growth of 3.5 percent this year and up to 4 percent next year.

The Deputy Prime Minister of Kosovo, Besnik Bislimi, in a post on the Facebook social network, assessed that this is the merit of the work of the Government of Kosovo, led by Albin Kurti.

"These results are not accidental. The trajectory in which we have directed the country is the right one, where we will see the fruits and benefits in the coming years. The Government's goal is for this growth to be sustainable and to continue to use the economic potential", Bislimi wrote.

Kosovo, even in the previous governments, according to the data of the international financial mechanisms, had the highest economic growth in the region.

But, despite this growth, according to experts in this field, Kosovo has had major economic problems, such as unemployment and poverty.

Kosovo has faced these two problems over the years.

According to the Statistics Agency of Kosovo (ASK), the unemployment rate in Kosovo in the first quarter of 2022 was 16.6 percent. Meanwhile, the data for the entire year 2021 show that the unemployment rate was over 20 percent.

With over 1.7 million inhabitants, Kosovo is considered to be one of the poorest countries in Europe.

The latest World Bank data on poverty in Kosovo are from 2017 and, according to them, over 23 percent of Kosovo's citizens live in poverty.

Skenderi: Kosovo cannot be praised for its economic growth

The professor of Macroeconomics and Environment in Business at the University of Pristina, Nagip Skenderi, says that while there are these figures of unemployment and poverty, Kosovo cannot boast of economic growth.

"Even though we have a symbolic economic growth, it is not the one that addresses the economic and social problems in Kosovo and that would improve the economic condition of the citizens who have also been hit by high inflation", Skenderi told Radio Evropa e Lire.

In order to mitigate these economic and social problems that Kosovo has, it is estimated that economic growth should be double-digit and maintain that trend for many years.

Professor Skenderi says that in a country where inflation is double-digit, big problems are created in the economy.

"The consumer's monthly basket is getting worse every day. Here is the biggest problem", he emphasizes.

By the end of 2021, inflation in Kosovo has been increasing.

The average inflation rate in 2022 was almost 12 percent.

The coronavirus pandemic and Russia's war in Ukraine have largely contributed to the increase in inflation elsewhere in the world.

To control inflation, the European Central Bank has aggressively raised interest rates, taking them from zero in mid-2022 to 3.5 percent in March this year.

Why does Kosovo have a higher economic growth than the countries of the region?

Professor of economics, Nagip Skenderi, says that the reason why Kosovo has the highest economic growth in the region is "because of the money sent by the diaspora and the expenses they make during their stay in Kosovo".

According to the data of the Central Bank of Kosovo, only last year, remittances reached the value of over 1.2 billion euros.

"In addition to remittances, the growth of the construction sector has also had a great impact, compared to the countries of the region. This sector has also grown as a result of the diaspora, who buy and build houses in Kosovo", says Skenderi.

Likewise, another indicator that has influenced economic growth, according to Professor Skenderit, is direct investment, which is also attributed to the diaspora.

According to the data of the Central Bank of Kosovo, foreign investments in Kosovo, in 2022, have reached the value of over 750 million euros - from over 420 million euros in 2021.

According to CBK, the biggest investments are made in the real estate sector and they come mainly from the Kosovo diaspora.

How sustainable is economic growth?

For a more sustainable economic growth, Professor Skenderi says that another model of the economy should be designed.

"In order to have a sustainable economic growth, the Government of Kosovo should focus on changing the economic structure. It should direct the stimulus measures in the direction of the productive sector".

"All our money goes to imports, for things that we can produce ourselves. Economic incentives should be focused on the production sector, agriculture", says Skenderi.

With the high trade deficit that Kosovo has, adds Skenderi, the economy can hardly develop.

The former governor of the Central Bank of Kosovo, Fehmi Mehmeti, in an interview given to REL in January, warned that the trade deficit is negatively affecting the economic activity of Kosovo.

Kosovo imports most products from neighboring countries and those of the European Union.

According to KAS data, in 2022, Kosovo exported products worth over 900 million euros, while it imported products worth over 5 billion euros.

Consequently, Kosovo's trade deficit in 2022 has reached over 4 billion euros./ Rel