KOSOVO ON THE ROUTE TO MARKET ECONOMY

Authors:

Domadenik PolonaMulaj IsaRedek Tjaša

17 November 8th Portorož Business Conference

Weak economic dynamics

2520

24472413

2501 2488

2000

2100

2200

2300

2400

2500

2600

2700

2001 2002 2003 2004 2005

-5

0

5

10

15

20

GDP in million € (2002 prices) Economic growth

17 November 8th Portorož Business Conference

Dependency on foreign assistance

0

500

1000

1500

2000

2500

3000

2001 2002 2003 2004 2005

GDP in million € (2002 prices) Donations

17 November 8th Portorož Business Conference

Future economic development

Despite numerous problems…1. Political situation and undefined status

2. Numerous problems in the process of economic transition: building own institutional system, slow restructuring, slow privatization

3. Often unclearly defined property rights, specially in the public sector

4. Poor legal system

5. Destruction due to war

6. Undeveloped financial system…

….Kosovo has development potential:1. Resource rich economy

2. Young population eager to work and learn

INDUSTRIAL STRUCTURE OF

KOSOVO ECONOMY

Authors:Polona DomadenikTjaša RedekBesnik BerishaMentor PllanaRiad RashitiArtan Sadiku

17 November 8th Portorož Business Conference

Insurance sector

Insurance sector relatively underdeveloped Mainly car insurance Life insurance market expanding fast (2002 395 policies, in

2005 25 296 policies)

17 November 8th Portorož Business Conference

Banking sector

Banking most developed financial serviceImportance of foreign banks

Increased competitionIncreased confidence

…and lowering the interest spread, which is very high (12) and contributes to slower economic activity

otherPCB

Reiffeisen

17 November 8th Portorož Business Conference

Construction sectorStrong activity after the war due to reconstruction…

* Category 3: up to 30% damage to the roof, category 4: over 30% damage, category 5: completely destroyed.

But several problems exist: lack of capital, low profits, lack of electricity, too much government interference, bureauctratic delays …

Housing Reconstruction Funded by International Donors, 1999-2002

6568

17282

2936

350

23656

6558

11782

5828

2074

23228

0

5000

10000

15000

20000

25000

1999 2000 2001 2002 Remaining

Category 3 & 4 Category 5

ERA’S ENTRY INTO THE KOSOVO MARKET

Authors:

Irena VidaJožica KomacVladka McLaughin LadmanovaJelena Rakić

17 November 8th Portorož Business Conference

ERA in KOSOVO

Growth Rates in Retail Trade (in %)

First quarter

2004

Second Quarter 2004

Third Quarter

2004

Fourth Quarter 2004

First quarter

2005

Second Quarter 2005

Average EU-25 3 3,1 2,8 2,5 2 1,7

Albania 29,9 30,5 8,6 8,3 -2,1 -15,3

Bosnia and Herzegovina

22,8 42,4 45,5 40,4 48,5 50

Croatia 10,5 8,3 9,3 8,9 3,1 6,7

Macedonia 5,3 3,8 4,5 6,6 5,3 14,7

Serbia and Montenegro (including Kosovo)

17,6 22,6 33,7 38,1 49,4 59,4

But the market is still immature… 60% of income is spent on food.

Source: Eurostat STS and National Statistical Institutes in Behrens, 2006, p. 6

17 November 8th Portorož Business Conference

Shopping in Various Retail Formats

Source: Consumer Survey in Kosovo (1), 2006.

14,17%

46,50%

27,83%

46,74%

16,50%

7,67%

33,33%

64,94%

0,00% 20,00% 40,00% 60,00% 80,00%

Open market

Small shops

Supermarkets

Hypermarkets

Shopping for Everyday Goods Shopping for Household Goods

Consumers were allowed to choose more than one answer.

17 November 8th Portorož Business Conference

Characteristics of the shoppers

Source: Consumer Survey in Kosovo (1), 2006.

Hypermarket Supermarket Small Stores

Up to 35 years old 70% 55% 59%

College degree or more 47% 29% 34%

Monthly family income above €450 45% 24% 34%

Monthly spending for household goods exceed €150

62% 36% 53%

Spend more than €8 per average small purchase

48% 37% 22%

Spend more than €80 per average large purchase

39% 23% 14%