Kosovo targets annual GDP growth of 7-8 percent

Kosovo is targeting economic growth of 7-8 percent annually from next year and expects to finalise the sale of its state-owned telecom company in November, the Economy Minister said on Wednesday. One of the poorest countries in Europe, Kosovo has drafted a new economic reform plan for 2011-2014 to fight widespread poverty and bring down the unemployment rate from 48 percent.
"We aim to have an economic growth of 7-8 percent starting from next year," Besim Beqaj, the Economy and Development Minister, told Reuters in an interview. "It is true that it is an optimistic plan and the plan looks (too) good, but we are convinced that this is possible," Beqaj said after returning from Bulgaria where he drew up the plan with six fellow ministers.
Fighting the black economy, privatising state assets and offering better opportunities to potential investors would be key to help make the plan work, Beqaj said. Kosovo expects to grow around 5.5 percent in 2011. High levels of crime and corruption, its small market of 2 million people and ethnic tensions between the majority Albanians and minority ethnic Serbs have kept foreign investors away since Kosovo declared independence from Serbia in 2008.
The World Bank ranked Kosovo as the 119th most favourable country to do business in 2011. "Based on our projections and after the necessary reforms, Kosovo will be listed in the top 40 reform-prone countries to do business by the end of 2014," Beqaj said. Under the new plan, the government does not see the need to borrow, but it may ask for loans if the need arises.
Landlocked Kosovo is building a 103 kilometer highway linking it to Albania's ports, which will cost around 800 million euros ($1.1 billion) when it is finished in 2013. The government expects to gain between 300 million ($435 million) and 600 million euros ($871 million) from the telecom sale, which was delayed last year because of snap general elections.
"We expect, by the end of November, to close the financial deal and the money will be transferred in December to the Kosovo budget," Beqaj said. Kosovo also aims to privatise its energy distribution network by September and to choose an investor to build a new coal-fired power plant by next March.
Foreign investors have already expressed interest in both projects, but could be discouraged if the government keeps delaying the privatisations as it has done until now. Beqaj said the new economic reforms would reduce unemployment by 8-10 percent every year from 48 percent at present.
But foreign diplomats in Pristina doubt whether the new plan will work. "Only a miracle can save Kosovo's economy and its finances," a Western diplomat in Pristina told Reuters. The International Monetary Fund has not yet decided whether to continue or cancel a 108 million euro ($156 million) standby aid deal after Kosovo's government broke the loan terms by raising public sector wages up to 50 percent.