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KOSOVO
Economic Freedom Score
25
50
75
Least
free 0
World Rank: Not Ranked
Regional Rank: Not Ranked
Most
100 free
This economy is not graded
osovo’s economy is not graded in the 2015 Index due
K
to insufficient data. Facets of economic freedom for
which data are available have been scored individually.
Freedom Trend
Kosovo will receive an overall economic freedom score and
ranking in future editions as more reliable information
becomes available.
Kosovo’s continued transition to a market-based economy
has yielded dividends over the past five years. Its move from a
centrally planned to a market-based economy has proceeded
steadily, and the government has engaged in a series of highprofile privatizations. Limited by political and geographic
constraints, the young nation has opened its borders to trade
and investment and now relies heavily on remittances and
foreign direct investment.
Continued progress is hindered by weak institutional capacity,
and the government has yet to show a sustained commitment
to economic freedom. Corruption is still prevalent and undermines the already restricted business environment. Political
interference in the judiciary is troubling. Remnants of the centrally planned economy still linger in a government bureaucracy that makes business formation costly and onerous.
BACKGROUND: Transitioning from a centrally planned economy to a more market-based economy, Kosovo has been privatizing many of its state-owned assets. The nation has opened
its borders to trade and investment, with services and manufacturing accounting for a large majority of economic activity.
Parliamentary elections in May 2014 produced political deadlock, further hampering progress on economic reform. Half
of Kosovo’s population is under 25, unemployment remains
high at 35 percent, and informal networks and transactions
remain a large portion of the economy. Despite progress
since independence, institutional capacity remains weak,
and remittances account for around 15 percent of GDP. A truly
independent judiciary is not yet a reality. Intrusive bureaucracy and costly registration procedures reflect a history of
central planning. Greater political commitment is needed to
implement the significant reforms necessary to jump-start
the economy and stamp out corruption.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
Not graded this year
2011
2012
2013
2014
2015
Country Comparisons
Country n/a
World
Average
60.4
Regional
Average
67.0
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 1.85 million
GDP (PPP): $14.0 billion
2.5% growth in 2013
5-year compound annual growth 3.2%
$7,600 per capita
Unemployment: 30.9%
Inflation (CPI): 1.9%
FDI Inflow: n/a
Public Debt: 9.1% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
273
KOSOVO (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 30.0
Freedom from Corruption 33.0
0
20
40
60
80
Rank
1–Year
Change
94th
113th
0
+4.4
100
Political corruption is one of Kosovo’s greatest challenges. Several reforms were implemented in 2013 to improve the transparency of campaign financing, but high-level senior officials
involved in corruption are not routinely punished. In general, the current institutional framework is not designed to resolve claims and challenges to property rights in an efficient and
effective manner.
Fiscal Freedom n/a
GOVERNMENT
Government Spending 73.9
SIZE
—
72nd
0
20
40
60
80
n/a
+0.9
100
Kosovo’s top individual and corporate income tax rates are 10 percent. Other taxes include
a value-added tax and a property tax. Government revenue is largely dependent on the VAT,
excise and trade taxes, and transfers from abroad. Taxation is poorly enforced. Public expenditures equal 29.5 percent of domestic output, and public debt equals approximately 9 percent
of GDP.
REGULATORY
EFFICIENCY
Business Freedom 66.8
Labor Freedom 72.1
Monetary Freedom 74.9
82nd
52nd
109th
0
20
40
60
80
+8.7
+0.8
+2.2
100
With no minimum capital required, it takes five procedures and less than a week to start a
company, but completing licensing requirements takes about five months on average. The
labor market is underdeveloped, and informal labor activity is substantial. Agricultural and
energy-related subsidies from the government and international donors amount to more than
one-third of GDP.
OPEN
MARKETS
Trade Freedom n/a
Investment Freedom 65.0
Financial Freedom n/a
—
68th
—
0
20
40
60
80
n/a
0
n/a
100
Kosovo is a member of the Central European Free Trade Agreement (CEFTA) region. Most
sectors of the economy are open to foreign investment. Kosovo has several state-owned enterprises. The financial system, dominated by a small number of banks, remains limited in scope
and depth. A lack of readily available financing hinders the development of a dynamic private sector.
Long-Term Score Change: n/a
GOVERNMENT
SIZE
RULE OF LAW
Property Rights
Freedom from
Corruption
274
n/a
n/a
Fiscal Freedom
Government
Spending
REGULATORY
EFFICIENCY
n/a
n/a
Business Freedom
Labor Freedom
Monetary Freedom
2015 Index of Economic Freedom
OPEN MARKETS
n/a
n/a
n/a
Trade Freedom
Investment Freedom
Financial Freedom
n/a
n/a
n/a