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EBRD expects 5% drop in Kosovo's GDP in 2020, 4% growth in 2021

EBRD expects 5% drop in Kosovo's GDP in 2020, 4% growth in 2021 Marina Mikhaylova/All rights reserved.

PRISTINA (Kosovo), October 1 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) said on Thursday it expects Kosovo's gross domestic product (GDP) to contract by 5% this year, maintaining its May forecast.

Kosovo's economic output is expected to return to growth in 2021 by expanding by 4%, the EBRD said in its October 2020 Regional Economic Prospects report, sharply downgrading its May projection for 7.5% growth of Kosovo's economy in 2021. 

The risks to the projection are on the downside as the COVID-19 pandemic may intensify again, the EBRD said, adding that further risks relate to the persistent weaknesses in the area of public investment management and the slower-than-anticipated recovery in key trading partners in the EU.

With the onset of the pandemic, the GDP growth rate in Kosovo slowed to 1.3% year-on-year in the first quarter of 2020, from 4.2% in 2019, mainly because of a 9% annual drop in investments and due to a 12% annual drop in construction activity.

Exports of services, which are mostly related to the Kosovo’s large diaspora and their visits to the country, recorded a decline of 35% year-on-year in the first half of 2020, the bank's latest report showed.  In contrast, exports of goods performed surprisingly well, growing by 20% year-on-year,  primarily on the back of expanding exports of base metals and chemical products.

Similarly, remittances inflow stayed strong, up 10% year-on-year in the first seven months of 2020, whereas annual inflation turned negative in July 2020, driven by the weak demand owing to the lockdown measures, it added.

Kosovo's unemployment rate fell slightly in the first quarter of 2020, to 25%, but may have increased since, the EBRD said.

The EBRD also noted that in June, the new government approved a medium term economic recovery package covering the period 2020-2023 and aiming to facilitate access to finance, reduce tax burden, support employment, agriculture as well as public enterprises.

As of Wednesday, Kosovo has registered a total of 15,620 coronavirus cases and 625 deaths, data by the National Health Institute showed.