2019 Index of Economic Freedom

Kosovo

overall score67.0
world rank51
Rule of Law

Property Rights57.2

Government Integrity44.7

Judicial Effectiveness53.5

Government Size

Government Spending77.7

Tax Burden92.5

Fiscal Health96.0

Regulatory Efficiency

Business Freedom73.8

Labor Freedom64.9

Monetary Freedom78.3

Open Markets

Trade Freedom70.8

Investment Freedom65.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 1.9 million
  • GDP (PPP):
    • $19.6 billion
    • 4.1% growth
    • 3.4% 5-year compound annual growth
    • $10,515 per capita
  • Unemployment:
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $3.6 million

Kosovo’s economic freedom score is 67.0, making its economy the 51st freest in the 2019 Index. Its overall score has increased by 0.4 point, with improvements for property rights, labor freedom, and fiscal health exceeding declines in judicial effectiveness and monetary freedom. Kosovo is ranked 26th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

Kosovo is Europe’s youngest country and one of its poorest. Although growth has been positive, it has not significantly reduced high unemployment; provided formal jobs, particularly for women and youth; or reversed large-scale outmigration. The economy is characterized by extremely limited regional or global economic integration, political instability, corruption, unreliable energy supply, a large informal economy, and a tenuous rule of law, including a lack of contract enforcement. Resolution of residential, agricultural, and commercial property claims remains a serious and contentious issue.

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Background

Kosovo gained independence from Serbia in 2008, and its sovereignty has been recognized by most members of the European Union, although NATO continues to maintain a peacekeeping force in the country. Hashim Thaci was elected president in 2016. Ramush Haradinaj, a former guerrilla fighter, began a second nonconsecutive term as prime minister in September 2017 after his center-right Alliance for the Future of Kosovo formed a coalition government following inconclusive snap parliamentary elections. Kosovo ratified a border demarcation agreement with Montenegro in March 2018. Kosovo’s economy has shown some progress in transitioning to a market-based system and maintaining macroeconomic stability but is still highly dependent on remittances and financial and technical assistance from Western donors and the diaspora.

Rule of LawView Methodology

Property Rights 57.2 Create a Graph using this measurement

Government Integrity 44.7 Create a Graph using this measurement

Judicial Effectiveness 53.5 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 does not always ensure due process. The administration of justice is slow, and there is insufficient accountability for judicial officials, who are prone to political interference. The efficiency of case resolution has improved, but a backlog remains. Weak rule of law fails to constrain endemic corruption.

Government SizeView Methodology

The top personal income and corporate tax rates are 10 percent. Other taxes include value-added and property taxes. The overall tax burden equals 23.5 percent of total domestic income. Over the past three years, government spending has amounted to 27.2 percent of the country’s output (GDP), and budget deficits have averaged 1.4 percent of GDP. Public debt is equivalent to 20.9 percent of GDP.

Regulatory EfficiencyView Methodology

Launching a business no longer requires minimum capital, and the government has introduced a streamlined legal framework for corporate insolvency. The formal labor market is not fully developed, and informal labor activity remains substantial. Large agricultural and energy-related subsidies provided by the government and international donors amount to more than one-third of Kosovo’s GDP.

Open MarketsView Methodology

The combined value of exports and imports is equal to 79.9 percent of GDP. The average applied tariff rate is 7.1 percent. Efforts to dismantle lingering nontariff barriers continue. In general, foreign and domestic investors are treated equally under the law. State-owned enterprises distort the economy. The financial system continues to evolve. About 59 percent of adult Kosovans have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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