2017 Index of Economic Freedom

Kosovo

overall score67.9
world rank46
Rule of Law

Property Rights70.3

Government Integrity45.9

Judicial Effectiveness58.0

Government Size

Government Spending77.8

Tax Burden93.5

Fiscal Health88.9

Regulatory Efficiency

Business Freedom68.8

Labor Freedom65.3

Monetary Freedom80.0

Open Markets

Trade Freedom70.8

Investment Freedom65.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 1.9 million
  • GDP (PPP):
    • $17.4 billion
    • 3.3% growth
    • 3.0% 5-year compound annual growth
    • $9,255 per capita
  • Unemployment:
  • Inflation (CPI):
    • -0.5%
  • FDI Inflow:
    • $359.8 million
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Kosovo’s transition to an open, market-based economy continues with an increasing degree of economic freedom. In a challenging regional economic environment, the landlocked economy has outperformed its neighbors, recording economic expansion every year since independence. Kosovo has adopted a constitutional fiscal rule to keep public debt from rising to unsustainable levels and has implemented competitively low corporate tax rates.

Despite notable progress in modernizing the regulatory framework and opening the economy to global commerce, lingering institutional and other structural shortcomings related to corruption and the rule of law have put downward pressure on overall competitiveness and productivity growth, limiting the emergence of a more vibrant private sector.

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Background

Kosovo is a parliamentary republic. Since gaining independence in February 2008, it has been recognized as a sovereign nation by 109 out of 193 members of the United Nations and 23 out of 28 members of the European Union. The 2013 Brussels Agreement helped to stabilize relations between Kosovo and Serbia, but NATO still maintains a peacekeeping force in the country. Parliamentary elections in June 2014 produced political deadlock. Isa Mustafa of the center-right Democratic League of Kosovo replaced Prime Minister Hashim Thaçi of the center-right Democratic Party in December 2014. Thaçi was elected to the largely ceremonial role of president in April 2016.

Rule of LawView Methodology

Property Rights 70.3 Create a Graph using this measurement

Government Integrity 45.9 Create a Graph using this measurement

Judicial Effectiveness 58.0 Create a Graph using this measurement

There are numerous property disputes between Kosovar Albanians and the Serb minority. The constitution provides for an independent judiciary, but courts do not always provide due process in practice. According to the European Commission, the administration of justice is slow, and there is insufficient accountability for judicial officials, who are prone to political interference. Corruption remains a problem.

Government SizeView Methodology

The top personal income tax and corporate tax rates are 10 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 21.1 percent of total domestic income. Government spending has amounted to 27.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 19.2 percent of GDP.

Regulatory EfficiencyView Methodology

Regulatory efficiency has improved. Launching a business no longer requires minimum capital, and licensing requirements, although they still take over 100 days on average, have become less costly. The formal labor market is not fully developed, and informal labor activity remains substantial. Agricultural and energy-related subsidies from the government and international donors are massive, amounting to more than one-third of GDP.

Open MarketsView Methodology

Trade is important to Kosovo’s economy; the value of exports and imports taken together equals 69 percent of GDP. The average applied tariff rate is 7.1 percent. In general, foreign and domestic investors are treated equally under the law. State-owned enterprises distort the economy. The financial system continues to evolve. The banking sector, dominated by foreign banks, remains stable. Capital markets are underdeveloped.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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