The Office of Economic and Commercial Affairs of the Italian Embassy in Pristina coordinates economic promotion activities in Kosovo with the aim of increasing trade, investment flows and technological cooperation between the two countries. The Office provides information, assistance and services to Italian companies and economic operators operating or planning to operate in Kosovo, as well as to local companies wishing to operate in Italy. This happens in coordination with the Italian Trade Agency – ICE office in Tirana, which also covers the territory of Kosovo.
GENERAL FRAMEWORK
Since its declaration of independence in 2008, Kosovo has made significant progress in adopting and implementing market-oriented policies and regulations. The country has also taken several measures to improve its business environment. Particularly in recent years, promoting trade and business and attracting foreign investment have become key priorities for Kosovo.
Kosovo is a member of the Central European Free Trade Agreement – CEFTA, the World Bank and the International Monetary Fund, as well as of the European Bank for Reconstruction and Development, which is particularly active in the country’s infrastructure development. The entry into force of the Stabilisation and Association Agreement between Kosovo and the European Union in 2016 was a major turning point for profitable business with this country.
In particular, the Stabilisation and Association Agreement provides for:
- gradual liberalisation of trade between Kosovo and the EU, with the aim of establishing a free trade area;
- approximation of Kosovo’s legislation to that of the European Union in areas such as competition, public procurement and intellectual property rights;
- enhancing of the cooperation in key areas such as energy, transport, environment, justice and home affairs;
- EU financial and technical assistance to help Kosovo implement the necessary reforms.
The prospect of EU membership represents a strong incentive for Kosovo to continue on the path of democratic and market reforms. It is an important incentive to consolidate the rule of law, improve the investment climate and strengthen the country’s economic competitiveness. Despite Kosovo’s small size, with a population of 1.7 million, the country offers a number of potential competitive advantages for investment and economic activity. These include:
- geographical proximity to Italy and the European markets, with an infrastructure that is constantly improving thanks to major investments also in recent years;
- the use of the euro as the official currency, an element of stability and trade facilitation;
- favourable legislation and tax regime for foreign investment;
- low labour costs, with an average gross monthly wage of EUR 521, falling to EUR 473 in the private sector.
These factors make Kosovo an attractive destination for Italian and European companies wishing to expand their activities in a developing economic environment with good growth prospects.
MACROECONOMIC FRAMEWORK AND TRADE
According to data published by the Kosovo Agency of Statistics, the country’s economy continued to grow in 2023, albeit at a more moderate pace than in the immediate post-pandemic period. In the fourth quarter of 2023, real GDP growth was 3.97%, slightly lower than the 4.78% recorded in the same period of 2022. For 2024, both the International Monetary Fund and the World Bank forecast respectively economic growth of 3.8% and 3.7% of real GDP, driven mainly by increased consumption and investment in the public and private sectors, while inflation is expected to hover around 2.7% in 2024.
The country has a high degree of openness to international trade and a strong dependence on international imports, with interchanges amounting to approximately EUR 6.3 billion as at 31 December 2023, a slight decrease (- 3.9%) compared to the figure for the year 2022.
According to our elaborations of the provisional monthly data published by the Kosovo Agency of Statistics, the trade between Italy and Kosovo as of 31.12.2023 was about 326.2 million euros, a slight increase (+ 1.2%) compared to the same period in 2022. In terms of total trade, Italy is Pristina’s sixth largest trading partner, with a total share of 6% (+ 1% compared to December 2022), after Turkey (15%), Germany (14.3%), China (10.9%), Albania (7.8%) and North Macedonia (7.7%).
In terms of exports alone, the top three supplier countries to Kosovo are Turkey, Germany and China, while Italy – with exports to the Balkan country amounting to approximately 287.5 million euros, showing an increase of 4.2% compared to 2022 – is the seventh supplier country. The top categories of Italian exports to Kosovo are: food and beverages, tobacco, machinery and equipment.
On the other hand, Italian imports from Kosovo recorded a decrease of 16.6%, confirming the downward trend already observed in 2022 and in the context of a general decrease in Kosovo’s exports compared to the year 2022 (- 6.2%). Kosovo’s main exports to Italy are rubber and plastic products and other non-metallic mineral products.
OPPORTUNITIES
As an emerging country, Kosovo offers a range of investment opportunities in energy, agriculture and agro-industry, mining, infrastructure and information and communication technology, while the sectors with the greatest potential in manufacturing are woodworking, textiles-clothing and leather goods.
Franchising is another area of opportunity, as evidenced by the continuous increase in the number of Italian and international brands present here.
These figures highlight the diversification and dynamism of Kosovo’s economy, which offers foreign investors a good range of opportunities to focus on in order to take advantage of the country’s growth potential.
(Updated on 26.06.2024)