Ministry of Finance January March 2018

Transcription

1 milion euro Government of the Republic of Kosovo Macroeconomic Overview Ministry of Finance January March 218 The Macroeconomic Overview is published by the Ministry of Finance every three months and its aim is to inform the public about the quarterly economic developments in Kosovo. Real Sector The domestic economy is expected to grow by about 4.6% over the year 218, mainly driven by increased investments especially public ones, followed by increased lending at low interest rates (including the possibility of private sector lending by the IFIs). Special contribution to this growth of economic activity is estimated to have come from fiscal reforms as well as structural reforms undertaken over the previous period. According to data from the Kosovo Agency of Statistics (see Graph 1), GDP in the fourth quarter of 217 compared to the same period of the previous year has increased by 3.2% in real terms, while 217 (as estimated by KAS) compared to 216 has marked an annual growth rate of over 3.7%. All the projections, those of the World Bank, the Monetary Fund and the Ministry of Finance, have set expectations for growth in 217 to over 4%. Graph 1. Real GDP, according to expenditure approach 2,. 1,8. 1,6. 1,4. 1,2. 1,. 8. Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q As far as price fluctuations are concerned, during the reporting period, the consumer price index (CPI) has continued to show a slight increase from January where it was negative to March resulting in a.1%. The growing tendency continues from 216. A continuation of price increase from previous years is expected in 218 as well. Graph 2. Consumer Price Index 8% CPI 6% Base CPI (excluding food and transport) 4% Food and beverages 2% % -2% -4% % 214.4% % 216.3% % 218 The prices of food and non-alcoholic beverages increased by.6% on average in this quarter and as can be seen from Chart 2, the CPI at the end of the reporting period has begun to show an upward trend as a result of the rise in world prices of food supply and the transmission of these inflationary pressures in the country. Moreover, as an important indicator of development in the real sector can be considered the number of new businesses registered and business perceptions for the overall business environment. In this regard, based on KAS data (Table 1) we see that in Kosovo by the end of March 218 a total of 2556 new businesses were registered, or 294 less compared to the same period of the previous year. Encouraging is the growth of new businesses in the manufacturing sector, while a decrease in newly registered

2 Balance Balance businesses at the beginning of the year, in the wholesale and retail trade sector, agriculture, forestry and fisheries, compared to those of previous years. This could be understood by the seasonal effect of the economic activity which is usually higher in the summer. This first quarter of 218, the largest number of registered businesses remain in the wholesale and retail trade, manufacturing, construction as well as accommodation and food service activities. Table 1. Number of registered businesses Business Registration Sector Q 217 Q 218 Wholesale and retail trade Manufacturing Agriculture, forestry and fishing Construction Accommodation and food service activities Others Total as it lays itself in a positive but worsening climate. The construction sector, services and wholesaling present improvements in their expectations and such estimates may come due to the onset of the spring season which has an impact on those sectors. Graph 4. Business climate in Q Positive but deteriorating climate Positive, -3 Negative, deteriorating Negate, but -4 climate Change in percentage points Retail Wholesale Construction Manufacturing Services Since the expectations and evaluations of local businesses on economic expectations and doing business are important indicators for economic performance, in the following are presented data from Kosovo Chamber of Commerce that reflect the position of sectors according to business evaluations. Graph 3. Business climate in Q Positive but deteriorating climate Positive, -3-4 Negative, deteriorating Negate, but -5 climate Change in percentage points Retail Wholesale Construction Manufacturing Services Graph 5. Introduces the expectations of the business climate that will prevail for the next six months. Business impressions related to the business climate are expectations about the climate that will prevail for the coming months. It is worth pointing out that generally business expectations are positive but at the very edge (between improving and deteriorating business climate). Excluded is the construction sector which perceives the business climate as positive and improving for the next 6 months. Graph 5. Business expectations in Q1 218 for the next six months Data from the first of 217 and 218 show that the perceptions of the majority of businesses related to the business climate have been positive. However, this does not apply to the retail sector

3 Balance Positive but deteriorating climate Positive, Change in percentage poin Retail Wholesale Construction Manufacturing Services Table 3. Import by countries in euro Country Q1 217 Q1 218 Germany 77,94 74,59 Italy 35,653 36,219 Serbia 95,455 97,62 Turkey 56,42 6,183 Kina 53,38 63,674 Others 29, ,533 Total 69, ,72 External Sector Imports of products continue to have a positive trend, marking an increase in total in relation to the same period of the previous year. As can be seen from Table 2, by the end of Q1 of this year, goods valued more than 655 million euros were imported, or an increase of 8% of total imports compared to the first quarter of 217. Table 2. Import by products, in euro Category Q1 217 Q1 218 Food, drink, tobacco 76,549 74,862 Mineral Products 96,153 1,54 Base metals and articles thereof 53,14 73,848 Machinery, mechanical and 71,583 78,68 electrical equipment Others 312,43 328,438 Total 69, ,72 Table 3 shows import data by country and it is noted that approximately 43% of total imports come from European Union countries. Whereas, the countries with the highest import shares are Serbia, Germany, Turkey and China. Imports from Germany have decreased during this quarter by 4% compared to the same period of the previous year, while the largest increase in imports is from China and Turkey compared to Q On the other hand, during the first quarter of 218, exports decreased compared to the same period of the previous year. Exports during this period amounts to over 73.3 million euros, that in percentage terms, decreased by approximately 4%. Table 4. Export by Products, in euro Q1 217 Q1 218 Mineral products 1,148 8,3 Base metals and articles thereof 31,989 26,511 Plastics, rubber and articles thereof 7,14 9,171 Others 27,127 29,378 Total 76,44 73,36 Table 4 shows a noticeable drop in metal exports compared to the same period of last year. During this quarter this category accounts for about 36% of total exports. Growth in exports of plastics and rubber products and mineral products were noted in this quarter. Over half of Kosovo's exports were intended for CEFTA and EU countries.

4 Table 5. Exports by country, in ' euro Country Q1 217 Q1 218 Germany Italy Bulgaria Albania Macedonia Serbia India China 4,398 5,161 1,738 1,484 1,786 2,6 11,599 12,494 8,432 9,565 5,882 5,323 9,779 8, Others 3,52 28,184 Total 76,44 73,36 Table 5 indicates the decline in exports to countries like Italy, Serbia and India. However, there is an increase in exports to Bulgaria and Germany, while CEFTA countries continue to remain the main partners for export of goods. Fiscal Sector Overall budget revenues indicate an increase in the first quarter of 218 compared to the same period of last year. This increase is 4 %, where direct tax revenues are 9.1% higher, and indirect tax revenues 3.5% higher. This increase in collection comes as a result of increased economic activity in the country, increased volume of private and public sector spending, the improvement of the business environment and also the increased efficiency of collecting agencies as a result of the structural reforms undertaken. Graph 6. Revenues, in millions of euro Tatimet direkte Tatimet indirekte I II III IV I II III IV I II III IV I Meanwhile, in terms of total expenditures, they also recorded an increase of 16.6% compared to the same period of last year. A more pronounced increase is noted in capital expenditures (44%), and12% in current ones. Graph 7. Expenditures, in millions of euro As seen from the graph below, the primary deficit has increased compared to the same period of the previous year (as a consequence of rising costs for this period). Graph 8. Primary Deficits, in millions of euro Capital expenditure Financial Sector Total budget expenditure I II III IV I II III IV I II III IV I The financial sector in Kosovo remains wellcapitalized, liquid and profitable as a result of strengthening conservative procedures against credit risk. Based on data from the Central Bank of Kosovo, deposits in the banking sector recorded an increase of 5.6% compared to the same period of the previous year. While loans showed a significant increase of 1.4% compared to the same period of 217. Total assets increased by 5.5%, reaching EUR 3.87 billion at the end of the reporting period. Të hyrat totale buxhetore Shpenzimet totale buxhetore Deficiti primar Current expenditure I II III IV I II III IV I II III IV I

5 Table 6. Deposits and loans in the financial sector, cumulative, end of period (in millions of euro). Q1 217 Q1 218 Deposits Loans Total Assets The first quarter of 218 was characterized by a fall in the interest rate on new loans compared to the same period of the previous year. From 7.25% in the first quarter of 217, the rate dropped to 6.3%. Positive change was also marked in the interest rate of new deposits. It marked an increase from.95% (first quarter 217) to 1.11% (first quarter 218). According to the Central Bank of Kosovo statistical data, the financial sector continues to be an important contributor in financing the country's economy. Compared to the first quarter of 217, loans increased in the first quarter of 218 accompanied by an increase of deposits as well. Such changes are good indicators of well capitalized banking sector. This is as a result of efforts to pursue the policy of ongoing reforms for macroeconomic stability and financial development. Graph 1 shows the developments of deposits and loans which indicate a gradual rising trend. New loan interest rates declined throughout the year 217 compared to the previous year 216. The average rate dropped from 7.47% to 6.83% during 216 and 217. On the other hand, the interest rate on new deposits during 217 marked an increase of.3 percentage points; from 1.1% in 216 to 1.4% in 217. Graph 9. Trend of interest rates and deposits Graph1. Trend of loans and deposits New Loans 217 New Loans 216 Nonfinancial Corporations Nonfinancial Corporations Credit Deposit Difference Credit Deposit 216 Household Household

6 Summary table Description Unit Q1 Q2 Q3 Q4 Q1 REAL SECTOR Gross Domestic Product Const. prices, diff : in% CPI Diff. in% Food and beverages Diff. in% Import prices Diff. in% : Production prices Diff. in% : LABOR MARKET Employment rate Diff. in% : Unemployment rate Diff. in% : EXTERNAL SECTOR Import of goods c.i.f., mil. euro Export of goods f.o.b., mil. euro Trade Balance mil. euro Import of goods and services mil. euro : Export of goods and services mil. euro : Current Account Balance mil. euro : Current Account Balance % of GDP : Foreign Direct Investments Balance, mil. euro : Remittances Balance, mil. euro : FISCAL SECTOR Total revenues mil. euro of which: Direct Tax Revenues mil. euro Indirect Tax Revenues mil. euro General Expenditures mil. euro of which: Current expenditures mil. euro Capital Expenditures mil. euro FINANCIAL SECTOR Deposits mil. euro Loans mil. euro Total financial sector assets mil. euro Loan Interest Rate % Deposit Interest Rate % Exchange rate EUR/EUR Effective real exchange rate index Sources: Kosovo Agency of Statistics Central Bank of Kosovo Kosovo Treasury (Ministry of Finance) Kosovo Chamber of Commerce ( : ) there are no data: in these cases, data is only available for the quarter as a whole * data is not available at the time of publication of this Statement / Potential discrepancies with other publications of the Unit come as a result of processing data from CBK, followed by a historic revision. The use of data from this publication is permitted only by quoting the source. The overview is published quarterly and potential updates are published on the official website. For any difference between the versions, the version in Albanian language prevails. Department for Macroeconomic Policy and International Financial Cooperation Macroeconomic Unit May, 218