1 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

The Macroeconomic Overview is published by Ministry of Finances every three months with regards to information for three months

economic developments in Kosovo

Real Sector

The domestic economy is expected to increase

by 4.6% during the year 2018, in real terms. The

economic growth will continue to be stimulated

mainly by the same incentives (investments,

export, private consumption) but public and

private investments are expected to have a more

prominent role towards increasing Gross

Domestic Product. A special contribution towards

this increase in the economic growth is evaluated

to have derived from fiscal structural reforms

undertaken during the previous period.

According to the data by the Kosovo Statistics

Agency (see Chart 1), GDP in the first quarter 2018

compared to the same period of the previous

year has marked an increase of 3.5% in real

terms, whereas first quarter of 2017 (according to

the preliminary data of KSA) in comparison to

2016 has marked an increase from 3.7%.

Chart 1. Real GDP, according to expenditure approach

During the reporting period, the consumer price

index (CPI) has commenced to yield increasing

tendencies, as a result of increasing world prices

of food and transmitting these inflationary

pressures in the country, especially during the

months of May-June. The overall level of prices

during this period marked an increase of 0.7%

which you can see in the Chart 2. The increasing

tendency continues to persist even during the

remaining period of the year 2018.

Chart 2. Consumers Price Index

New businesses registered as well as business

perceptions on the overall business environment,

are considered as important indicators of the

economic developments in the country.

According to KSA (Table 1), 2,636 new businesses

were registered during the second three months

of 2018; 412 were closed. In comparison to the

same period of the previous year, 399 more new

businesses were registered while 32 businesses

less were closed this year. The increase of new

businesses in all sectors is very encouraging,

excluding the accommodations and food service

activities sectors, which remained relatively the

same. The highest increase in new businesses

during this period, remains in the trade sector of

wholesale and retail, agriculture, forestry and

fishermen, manufacturing and construction.

-3%

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017 2018

GDP % Change

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2014 2015 2016 2017 2018

CPIBase CPI (excluding food and transport)Food and beverages

Government of Republic of Kosovo Macroeconomic Overview

Ministry of Finance April –June 2018

2 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

Table 1. The number of registered businesses

Sector of business registration TM2 2017 TM2 2018

Wholesale and Retail 623 723

Manufacturing 234 299

Agriculture, Forestry and

Fishermen 96 198

Construction 202 260

Accommodation and food

service activities 278 277

Others 804 879

Total 2,237 2,636

Since the expectations and the assessment of

domestic businesses over the economic

expectations and doing business are imperative

indicators on economic developments, the

Kosovo Chamber of Commerce in the following

table has provided the data which reflect the

position of the sector according to business

assessments.

Chart 3. Business Climate TM1 2017

The data of the first quarter of 2017 and 2018

show that the assessments of the majority of

businesses related to doing business climate have

been positive. However, this does not apply to

the wholesale and construction sector, which in

this quarter are listed in a positive but worsening

climate. The processing, retail, and service sectors

present improvements in their expectations and

such estimates may come due to the beginning

of the spring season, which has an impact on the

various sectors in general.

Chart 4. Business Climate TM1 2018

Chart 5. Introduces the expectations of the business

climate that will prevail for the next six months.

Business assessments related to the Doing Business

climate are with some changes with climate

expectations that will prevail for the upcoming

months.

It is worth noting that in general the business

expectations are positive but at the margins of the

deterioration and improvement, apart from the

construction sector, which has positive expectations

with improvements regarding the climate that will

prevail in the next 6 months.

Chart 5. Business expectations in Q1 2018 for the next

six months

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Shitja me pakicë Shitja me shumicë Ndertimtari

Perpunim Sherbime

Klime pozitive,por me perkeqesim

Klime pozitive, me permiresim

Klime negative,me perkeqesim

Klime negative,por me permiresim

Bal

anca

Ndryshimi ne pike perqindjeje

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-40

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0

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Shitja me pakicë Shitja me shumicë Ndertimtari

Perpunim Sherbime

Klimë pozitive,por me përkeqesim

Klimë pozitive, me përmiresim

Klimë negative,me përkeqesim

Klimë negative,por me përmiresim

Bal

anca

Ndryshimi në pikë përqindjeje

0

20

40

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-40 -30 -20 -10 0 10 20 30 40 50

Shitja me pakicë Shitja me shumicë Ndërtimtari

Përpunim Shërbime

Klimë pozitive, me përmirësim

Bal

anca

Ndryshimi ne pikë përqindjeje

Klimë pozitive,por me përkeqësim

3 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

Foreign Sector

The foreign trade balance continues to keep

negative trends. Import of goods continued to

grow even during the second quarter with an

increase of 12.7% over April-June compared to

the same period of the previous year. Table 2

shows four product groups that account for more

than half of imports during the TM2 period.

Table ; Import according to products in 000 euro

Category TM1 2017 TM1 2018

Food in general, drinks and tobacco 101,423 104,016

Mineral products 107,164 121,607

Base metals and other items from them 80,683 100,639

Machinery, machinery and electric

equipment

93,730 132,756

Others 403,915 427,655

Total 786,915 886,673

Table 3 shows the structure of imports by country,

import data by country shows that about 44% of total

import comes from European Union countries.

Whereas, the countries with the highest import share

are Germany, Serbia, Turkey and China. With regard

to import from Germany, it has increased in this three-

month period by 22.5%, as well as from Turkey with a

growth of 12.5% compared to the same period of the

previous year, while there is a decrease in imports

from Croatia by 12.6% TM2 2018 compared to TM2

2017.

Table 3. Import by country, in ‘000 euro

Country TM2 2017 TM2 2018

Germany 95,386 116,832

Italy 48,443 62,861

Serbia 107,785 113,879

Turkey 83,261 93,695

China 67,845 72,957

Others 384,197 426,450

Total 786,915 886,673

With regard to exports, during the second

quarter of 2018 they have decreased compared

to the same period of the previous year. Exports

of goods during this period amounted to over

95.4 million euros, which is a 7.3% decrease.

Table 4. Exports according to products, in ‘000 euro

TM2 2017 TM2

2018

Mineral products 24,113 20,380

Base metals and other items from them 33,814 26,500

Plastic , rubber and other items from

them

8,925 11,388

Others 36,057 37,203

Total 102,910 95,472

From Table 4. We see that there is a significant

decline in exports of base metals and mineral

products by 22% and 15%, respectively. While

during this quarter we see a 28% increase in

exports of plastics and rubber products and

mineral products. About 85% of Kosovo's exports

were destined for CEFTA and EU countries.

Table 5. Exports by country in ‘000 euro

Country TM1 2017 TM1 2018

Germany 4,829 5,617

Italy 1,329 2,208

Bulgaria 2,605 2,364

Albania 15,958 16,973

Macedonia 13,199 12,189

Serbia 15,629 11,276

India 12,676 758

China 1,616 441

Others 35,069 43,646

Total 102,910 95,472

Table 5 shows a decrease in exports to the countries

of India, Serbia and China. However, there is an

increase of exports towards Germany, Italy and

Albania, while CEFTA countries continue to remain the

main good export partners. Given the dominant share

of metals in Kosovo exports, the decline of exports for

this product continues to significantly affect total

exports, therefore we see a decrease of about 7% in

total exports for this period.

4 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

In the other hand, services balance even during April-

May 2018 (as we still don’t have data for June,

comparison will be performed with same period of

last year) services export continued growing

compared to same period of last year. The import of

services compared to the same period has increased

about 14%.

Chart 6. Trade Balance

Fiscal sector

Total budgetary incomes show an increase in

second quarter of 2018 compared to second

quarter of 2017. This increase marks the rate of

7.5% where the incomes from direct tax are 16.1%

higher, whereas indirect taxes increased by 5.7%.

This increased collection results from added

economic activities in the country, increase of

expenditure volume of private and public sector,

improvement of the doing business environment,

and efficiency of collecting agencies as result of

structural reforms.

Chart 7. Incomes, in Euro millions

Total expenditure increased by 4% compared to

same period of last year. Current expenditure

increased by 5.6%, whereas capital expenditure

remains similar to the previous trend.

Chart 8. Expenditure in millions Euro

As a result from increased expenditure during this

period, as seen in the chart below, primary deficit

increase compared to the same period of the last

year.

Chart 9. Primary deficit, in Euro millions

Financial Sector

Financial sector in Kosovo continues to remain

well capitalized, solvent and profitable. This

comes as result of strengthening of conservative

procedures to loan risk. Based on data from

Central Bank of Kosovo, deposits marked an

increase of 5.7% compared to same period of

previous year. In the other hand, increase of loans

were even higher, reaching a rate of 10.8%. Total

assets marked an increase of 5.2%, reaching 3.89

billion euro at the end of reporting period.

Table 6. Deposits and loans in financial sector,

cumulative, end of period (in Euro millions).

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

Import Export Trade Balance

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2015 2016 2017 2018

Direct tax Indirect tax Total budget revenue

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I II III IV I II III IV I II III IV I II

2015 2016 2017 2018

Capital expenditureCurrent expenditureTotal budget expenditure

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I II III IV I II III IV I II III IV I II

2015 2016 2017 2018

Total budget revenue Total budget expenditure

Primary deficit

5 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

TM2 2017 TM2 2018

Deposits 2888 3086

Loans 2391 2661

Total Assets 3671 3891

The decrease trend of interest rates for new loans

continued during second quarter of 2018 as well.

Interest rates decreased from 6.7% in second

quarter of 2017, to 6.66% in second quarter of

2018. Interest rates of deposits experienced

positive change as well. They increased to 1.24%

in the second quarter 2018 from 1.0% in the same

period in 2017. According to statistical data of

Central Bank of Kosovo, financial sector continues

to be an important contributor in financing the

country’s economy.

Compared to the second quarter of 2017, in the

second quarter of 2018, the number of loans and

deposits increased. Such changes are good

indicators that banking sector continues to

remain well capitalized. A contributor to this is the

effort to follow policies for continuous reforms on

macroeconomic stability and financial

development. Chart 10 presents developments of

deposits and loans, where increase trend is

evident.

Interest rates of new loans decrease during 2017,

compared to previous year. Average rate

decreased from 7.47% to 6.83% during 2016 and

2017. In the other hand, interest rates for new

deposits during 2017 increase by 0.03 percentage

points: from 1.01% in 2016 to 1.04% in 2017.

Chart 10. Trend on interest rates and deposits

Chart 11. Trends on loans and deposits

6.71 6.66 6.46 6.27

7.05 7.23

1.00 1.24 1.00

1.67

0.86 1.07

5.715.42 5.46

4.60

6.19 6.16

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6.00

7.00

8.00

Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018

New loans Non-financial corporations Households

Credit Deposit Difference

2000

2200

2400

2600

2800

3000

3200

Credit Deposit

6 | M a c r o e c o n o m i c O v e r v i e w A p r i l – J u n e 2 0 1 8

Summary table

Description Unit 2015 2016 2017 2018

TM1 TM2 TM3 TM4 TM1 TM2

REAL SECTOR

Gross Domestic Product Constant price,

change in % 4.0 3.9 2.7 4.3 4.4 3.2 3.5 :

CPI change in % -0.5 0.3 1.6 1.9 1.7 0.7 0.0 0.7

Food and drinks change in % 0.4 -0.4 1.0 1.9 1.4 1.9 0.6 0.5

Import prices change in % -1.2 -2.5 5.2 4.3 4.2 2.5 1.4 :

Production prices change in % 2.7 -0.1 0.9 5.5 5.6 1.6 0.2 :

LABOR MARKET

Employment rate change in % 25.2 28.0 28.9 29.9 30.4 29.8 28.8 :

Jobless rate change in % 32.9 27.5 30.5 30.6 30.2 30.6 26.5 :

EXTERNAL SECTOR

Goods import c.i.f.,

mil. euro 2635 2790 609 787 821 830 656 886.7

Goods export f.o.b.,

mil. euro 325 310 76 103 105 94 73 95.5

Trade balance mil. euro -2309 -2480 -533 -684 -716 -736 -582 -791

Import of goods and services mil. euro 2926 3091 665 853 953 899 729.4 629.4*

Export of goods and services mil. euro 1274 1439 235 305 874 296 269.7 200.1*

Balance of current account mil. euro -497 -481 -168 -250 238 -233 -154.1 -202*

Balance of current account % e GDP -8.6 -7.9 -2.7 -4.0 3.8 -3.7 -8.38 :

Direct foreign investments Balance, mil. euro 309 220 65 84 66 74 30.55 45.47*

Remittance Balance, mil. euro 609 636 149 183 183 194 170.48 137.43*

FISCAL SECTOR

Total incomes

Out of which:

mil. euro 1457 1596 354 415 476 436 368 439.232

Incomes from direct tax mil. euro 198 232 57 62 60 59 63 394.4

Incomes from direct tax mil. euro 1107 1227 253 321 380 361 262 339.027

Total incomes

Out of which:

mil. euro 1551 1658 349 421 422 549 407 434.19

Current expenditures mil. euro 1149 1221 286 315 296 386 320 325.519

Capital expenditures mil. euro 404 444 56 103 121 191 81 102.225

FINANCIAL SECTOR

Deposits mil. euro 2703 2898 2912 2888 3047 3093 3074 2939.1

Loans mil. euro 2020 2230 2295 2391 2407 2485 2534 3891.5

Total assets of financial sector mil. euro 3385 3637 3670 3671 3811 3876 3873 1627.9

Interest rate on loan % 8.3 7.5 7.3 6.7 6.6 6.8 6.9 6.66

Interest rate on deposits % 0.9 1.01 0.9 1.0 1.1 1.1 1.1 1.24

Exchange rate EUR/EUR 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1

Effective real rate of exchange index 104.7 104.6 105.9 104.6 104.8 104.5 104.9 104.4

Sources: Kosovo Statistics Agency

Central Bank of Kosovo

Kosovo Treasury (Ministry of Finance)

Kosovo Chamber of Commerce

( : ) – No data: in these cases data are available only for quarter

as entirety* data aren’t available at the time of publishing this

statement/possible discrepancies with other unit publications

comes as result of processing data by CBK, following even

historic revision.

The use of data from this publication is permitted only by

quoting the source. The overview is published quarterly and

potential updates are published on the official website. For

any difference between the versions, the version in Albanian

language prevails.

Department for Macroeconomic Policy and International

Financial Cooperation

Macroeconomic Unit

August, 2018