Economic growth to quicken to 5.1% in 2020 on private consumption
The European Commission said Kosovo`s economic growth is expected to accelerate from 4.6% in 2018 to 5.1% in 2020, driven by private consumption.
Private consumption should remain the main driver of growth supported by remittances, rising social transfers and partially recovering employment, the Commission said in a report containing its assessments of the 2018 Economic Reform Programmes (ERPs) of countries that are candidates or potential candidates for EU membership.
Kosovo's economic growth is stable but new sources of growth remain scarce, the Commission said, adding that the projected acceleration relies on ambitious public investment plans which should drive the overall investment growth.
According to Kosovo's ERP, shortcomings in public investment execution, a weak electricity supply, and political instability remain the main downside risks to the economy.
“The possible construction of a major new power plant constitutes an upside risk,” the Commission said. It referred to the plan for construction of a 500 MW coal-fired power plant in Kosovo, a project estimated to cost around 1.3 billion euro ($1.51 billion).
Maintaining fiscal sustainability and addressing large investment needs are the main public finance objectives in 2018-2020, the Commission noted.
The Commission also said that Kosovo faces numerous development challenges which call for a judicious use of its limited fiscal space.
The informal economy continues to hamper Kosovo's business environment, the Commission said, adding that this results in unfair competition from unregistered companies and in problems with accessing finance, which, in turn, hampers the ability of registered businesses to grow and innovate.
“The unreliable supply of energy continues to be a major constraint for Kosovo's competitiveness,” the Commission noted. It also noted that the level of employment in the private sector is still very low.