Kosovo - Market OverviewKosovo - Market Overview
- The Republic of Kosovo is Europe’s youngest country – and one of its poorest – but it has maintained positive economic growth rates, most recently 4.4 percent in 2017. Kosovo is working to improve the investment climate by strengthening the legal environment necessary to attract and retain foreign investment.
- In 2017, the Central Bank of Kosovo estimated Foreign Direct Investment (FDI) at €287.8 million, up from €234.8 million in 2016. The unemployment rate is estimated at 30.0 percent. The difficult labor-market conditions affect youth and women disproportionately and risk undermining the country’s social fabric. Despite these challenges, Kosovo’s relatively young population, low labor costs, and abundant natural resources have attracted foreign investment, with several international firms and franchises already present in the market.
- Kosovo’s main trade partners are EU countries (approximately 43.1 percent of imports and 24.9 percent of exports) and its neighbors through the Central European Free Trade Agreement (CEFTA – approximately 28.1 percent of imports and 48.4 percent of exports). Kosovo continues to run a large trade deficit, with exports covering only about 12 percent of imports.
- Germany was the largest investor in Kosovo in 2017 (€55.9 million). U.S. investment reached €26.5 million in 2017.
- Kosovo has much to offer U.S. investors and exporters:
- Kosovo’s liberal trade regime enables duty-free exports for the majority of Kosovo goods to the EU market. The Stabilization and Association Agreement (SAA) with the EU has further reinforced trade liberalization and removed many of the remaining trade and tariff barriers.
- Kosovo’s location in the heart of the Balkans offers easy access to the Balkans and CEFTA members, which represent a market of approximately 28 million people.
- Improving infrastructure evident by the completion of a modern highway to Albania and a second highway to Skopje, Macedonia currently under construction. More than one million passengers a year pass through Pristina’s international airport. The airport authority is preparing to extend the runway and upgrade the landing system, which would lower flight cancellations in the winter months and accommodate larger planes.
- Kosovo’s young workforce is mostly multilingual (often speaking English and German). Half of Kosovo’s population is under the age of 30.
- Kosovo has competitive labor costs and tax policies. Kosovo’s average monthly salary of €371 is amongst the lowest in Europe, and the current tax regime is business-friendly with a flat, 10 percent corporate income tax. VAT rates for basic food items and public utilities are 8 percent, while VAT for all other items is 18 percent.
- Kosovo ranked 40 out of 190 countries in the 2017 World Bank’s Doing Business report. Kosovo is among top 10 economies with the most notable improvement in doing business reforms. Kosovo has jumped twenty places in the ways of doing business since 2016.
- Kosovo is very pro-American and the government recently announced a special economic zone near Gjakova that will be open only to U.S. busisnesses.
- Major foreign investment projects in the near term include the ongoing construction of a €600M highway to Macedonia and the construction of a new 450MW coal-fired thermal power plant. As a member of the EU-funded Western Balkans 6 core transportation network aimed at improving regional connectivity, Kosovo plans to revitalize key railway lines.
Kosovo Trade Development and Promotion