EBRD maintains Kosovo`s 2019 economic growth projection at 4%
The European Bank for Reconstruction and Development (EBRD) said on Wednesday it expects Kosovo`s economy to grow by 4.0% this year, affirming its last projection from November, as domestic demand is seen remaining the main growth driver.
“The risks to the projection are balanced. While upside risks relate to the possible start of the construction of a major new power plant and faster reform progress, weaknesses in public investment management, the economic slowdown in the EU and domestic political uncertainty represent the main downside risks,” the EBRD said in its May 2019 Regional Economic Prospects report.
Inflation remained subdued for a year as a whole (at around 1%), but it has gone up since the second half of 2018, reaching 3.3% in March 2019, the bank noted.
“The surge in inflation has been mainly driven by food price increases (reaching 8% year-on-year in March), possibly also related to the imposition in November 2018 of 100% taxes on goods imported from Serbia and Bosnia and Herzegovina,” the bank added.
In 2020, the EBRD expects Kosovo's economy to grow by 4%. Kosovo's gross domestic product (GDP) increased by 3.9% in 2018, driven by investment and consumption, after rising 3.7% in 2017.
Higher growth has not yet translated into more jobs, however, as the employment rate fell in 2018 by one percentage point, to 29%, the EBRD noted, adding that the unemployment rate went down only slightly, staying close to 30%, and at 55% for youth.
Last week, energy group ContourGlobal and Kosovo's government said General Electric has been selected as the preferred bidder for the construction and long-term maintenance of Kosova e Re, a 500 MW coal-fired power plant expected to cost around 1.3 billion euro ($1.5 billion).
In the report, the EBRD lowered its 2019 economic growth forecast for Southeast Europe to 3.0% from 3.2% predicted in November, following a slowdown to 3.4% in 2018 from 4.3% in 2017. In 2020, growth in the region is also seen at 3.0%.
"Each country in the region has its own challenges [...] The biggest challenge globally is the US-China trade war," the EBRD’s chief economist, Sergei Guriev, told SeeNews on the sidelines of the bank's 2019 annual meeting in Sarajevo, Bosnia.
"Our countries are not directly affected, but they are affected indirectly. If the Chinese economy goes down, the German economy goes down, and our countries are very much dependent on German and Western economies," Guriev said.