2018 Index of Economic Freedom

Kosovo

overall score66.6
world rank56
Rule of Law

Property Rights52.3

Government Integrity45.4

Judicial Effectiveness59.0

Government Size

Government Spending77.9

Tax Burden93.2

Fiscal Health92.8

Regulatory Efficiency

Business Freedom72.6

Labor Freedom58.3

Monetary Freedom81.2

Open Markets

Trade Freedom70.8

Investment Freedom65.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 1.9 million
  • GDP (PPP):
    • $18.4 billion
    • 3.3% growth
    • 3.0% 5-year compound annual growth
  • Unemployment:
  • Inflation (CPI):
    • 0.3%
  • FDI Inflow:
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Kosovo’s economic freedom score is 66.6, making its economy the 56th freest in the 2018 Index. Its overall score has decreased by 1.3 points, with a steep decline in scores for the property rights and labor freedom indicators overwhelming improvements in fiscal health and business freedom. Kosovo is ranked 27th 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. Despite managing to record positive growth rates, the economy is characterized by extremely limited regional or global economic integration, political instability, corruption, unreliable energy supply, a large informal economy estimated at 35 percent of GDP, 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

Since gaining independence from Serbia in 2008, Kosovo has been recognized as a sovereign nation by most members of the European Union, but NATO still maintains a peacekeeping force in the country. Snap parliamentary elections in June 2017 once again produced political deadlock, although the nationalist Movement for Self-Determination more than doubled its vote share. Prime Minister Isa Mustafa’s center-right Democratic League of Kosovo came in first but fell short of a majority. Kosovo’s economy has shown 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. The majority of state-owned enterprises have been privatized with international assistance.

Rule of LawView Methodology

Property Rights 52.3 Create a Graph using this measurement

Government Integrity 45.4 Create a Graph using this measurement

Judicial Effectiveness 59.0 Create a Graph using this measurement

The government has continued to make progress toward resolving property claims between Kosovar Albanians and the Serb minority. The constitution provides for an independent judiciary, but the administration of justice is slow and there is insufficient accountability for judicial officials, who are susceptible to political interference. Endemic corruption remains a serious problem.

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 21.8 percent of total domestic income. Over the past three years, government spending has amounted to 27.1 percent of total output (GDP), and budget deficits have averaged 2.0 percent of GDP. Public debt is equivalent to 20.6 percent of GDP.

Regulatory EfficiencyView Methodology

In 2016, the government made paying taxes easier and less costly for businesses. It also made exporting faster and less expensive. The formal labor market is not fully developed, and it is estimated that the informal economy accounts for 35 percent of GDP. Massive agricultural and energy-related subsidies by the government and international donors amount to more than one-third of GDP.

Open MarketsView Methodology

Trade is significant for Kosovo’s economy; the combined value of exports and imports equals 74 percent of GDP. The average applied tariff rate is 7.1 percent. Nontariff barriers impede trade. Government openness to foreign investment is above average. The level of financial intermediation in the evolving financial system is increasing. The banking sector, dominated by foreign banks, remains stable. Nonperforming loans are a serious problem.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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