Despite being hit hard by the COVID-19 pandemic, Kosovo’s economy showed resiliency despite inflationary pressure. In 2022, Kosovo’s GDP growth rate of 3.5 percent was driven mainly by exports and private consumption. Notwithstanding global supply chain disruptions, above average inflation levels, unreliable energy production, and anticipated expensive energy imports, forecasts for economic growth in 2023 remain positive. The IMF forecasts 3.5 percent growth in 2023, whereas the World Bank forecasts growth to pick up modestly reaching 3.7 percent. As of August 2023, Kosovo’s financial sector and public sector finance remain stable.
Due to the relative importance of imports for meeting consumer demand, the country maintains a persistent trade deficit. Leading export industries include agriculture, mining, the home bedding industry, and construction. Kosovo’s largest exports are scrap metal, nickel, lead, and mattresses. Kosovo’s highly pro-American population welcomes U.S. investment in various sectors, including:
Energy: Kosovo is looking to expand its power generation capacity and diversify its energy supply, including through commitments to renewable energy. Kosovo has the world’s fifth largest lignite coal reserves and uses around eight million tonnes of coal each year to fuel the five coal units in its two power plants, known as Kosovo A and Kosovo B. These two plants, while generating over 90 percent of the country’s energy, are antiquated, and regularly breakdown due to old age and delayed maintenance. The Kosovo Assembly passed the National Energy Strategy in 2023. By 2031, the data-driven and forward-looking strategy commits the government to: (1) increased generation from renewable energy sources to at least 35 percent of the generation mix; (2) a 32 percent reduction of greenhouse gas emissions; and (3) phasing-out of at least one lignite-fired generation unit. The strategy also foresees Kosovo completing all preparations for the introduction of a carbon pricing system by 2026. With the help of USAID, Kosovo launched its first-ever, renewable 100-megawatt solar auction on March 12. In addition to solar auctions, numerous international donors are working with Kosovo on other programs. Kosovo signed a $236 million Millennium Challenge Corporation compact ($34 million co-funded by Kosovo) in July 2022. The MCC compact includes installing high-capacity batteries to serve as energy storage and stabilize the electricity grid. Additionally, in February of 2023 the EU announced a €75 million Energy Support Package to expand subsidy and incentive schemes to increase energy efficiency with focus on vulnerable households.
Mining and Minerals: Historically an important contributor to Kosovo’s economy, mining has declined in relevance due to a lack of investment in equipment, facilities, and development of new mines. The sector has significant foreign investment potential, and the Independent Commission of Mines and Minerals (ICMM) has issued over 500 exploration and mining licenses since 2007, but in the last two years license processing has slowed. In 2016, the Kosovo Assembly passed a law that transformed Trepca – the biggest mining company in Kosovo – from a socially owned enterprise into a joint stock company with the majority of shares belonging to the government. Kosovo has some evidence of critical minerals however challenges include delays in issuance of exploration licenses for areas categorized by the ICMM and Government “of special interest.” The most known critical minerals are nickel and manganese.
Telecommunications and Information Technologies: Kosovo’s telecommunications operators have transitioned to 3G and 4G services. The Government of Kosovo is working to position the country as a regional hub for information technology (IT)-related products and services, building on the strong IT and English-language skills within the workforce. There are a growing number of IT companies focused on outsourcing for European and U.S. companies, and the number of inbound and outbound call centers is growing. However, Kosovo Telecom, a state-owned company, is under significant financial pressure.
Health: Kosovo has an urgent and growing need for quality basic and specialized health and medical services, personnel, facilities, and products. The sector is dominated by public-sector services, but private-sector investment has recently increased. Many of Kosovo’s citizens travel to other countries in the region to meet their immediate health-care needs. Local solutions present a potentially lucrative opportunity for outside investors. The COVID-19 pandemic caused the Ministry of Health to purchase additional products and services for management of the crisis, but the fragile health system in Kosovo has struggled to manage the sudden influx of patients seeking treatment. As in other countries, Kosovo has experienced a rise in demand for telemedicine services because of the pandemic. Dental clinics, eye surgery centers, and facilities offering cosmetic procedures are also on the rise.
Waste Management and Recycling: As a developing country, Kosovo’s waste has increased faster than its capacity to manage it. Illegal dump sites are common, landfills are insufficiently constructed and managed, and all hazardous waste must be exported for proper handling and disposal. Although recycling has only recently begun in Kosovo, certain companies in niche markets have been able to operate profitably in this sector. Kosovo will likely reform its waste collection, treatment, and storage infrastructure soon to comply with EU regulations.
Other Services: As Kosovo’s economy develops, the need for expert financial, legal, architectural, engineering, software development, public relations, and graphic design services will grow.