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News 21 Jul 16

Kosovo Eyes 3.7 Per Cent Growth in 2016

The Central Bank of Kosovo expects significant growth in the economy in 2016, although the widening trade deficit remains a cause for concern.

Ervin Qafmolla
The governor of the Central Bank of Kosovo, Bedri Hamza. Photo: Central Bank of Kosovo

The Central Bank of Kosovo has issued an optimistic estimate of economic growth for this year.

In its annual report, published on Wednesday, the bank set its GDP growth forecast at 3.7 per cent for 2016, saying there were clear signals of continued improvement in a number of economic indicators.

It also stated that economic growth for the previous year was 3.5 per cent – a higher figure than the International Monetary Fund, IMF, estimated in its first review of the Stand-by Arrangement with the country.

In January, the IMF estimated Kosovo's growth in 2015 was 2.4 per cent – a twofold improvement on the 1.2-per-cent growth rate of 2014.

Bedri Hamza, governor of the central bank, while acknowledging that Kosovo’s economy was largely import-driven, ranked a number of factors that had fuelled progress in 2015.

“The increase in consumption and investment from the private sector constitute the primary contributing factors in economic growth,” Hamza said.

The report, however, acknowledged that the improving situation of the Eurozone had resulted in a surge of money sent back home by Kosovo migrants, ranking remittances among the top factors in supporting the local economy.

The bank estimates that 566 million euros of remittances, a third of which came from Germany, entered Kosovo in 2015, most of which went through banks and money transfer agencies.

Foreign direct investment, FDI, estimated at 324 million euros, also scored a twofold increase in 2015 compared with the previous year.

However, sluggish growth in production has left Kosovo increasingly dependent on imports, making the trade deficit a major concern.

Exports from Kosovo grew by just 0.23 per cent in 2015, accounting for a total export income of 325.3 million euros, according to the statistical agency.

Kosovo, meanwhile, imported more than 2.5 billion euros worth of goods in 2015, resulting in a trade deficit of 2.2 billion euros.

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