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GAP: Price increase in Kosovo and potential measures to mitigate the effect of inflation

Jan 25, 2022

GAP Institute published its report Price increase in Kosovo and potential measures to mitigate the effect of inflation. Economic growth recorded in 2021 in Kosovo was due to the increase in domestic demand, fiscal stimulus packages for economic recovery, as well as support from the Diaspora. Remittances as one of key drivers of consumption, as of October 2021, also recorded an annual increase of 20 percent, reaching EUR 956 million for the period January–October 2021. Another incentive for economic growth was the export of goods, which by October 2021 reached EUR 613.9 million, significantly higher than exports in 2019 and 2020 at EUR 383.5 million and EUR 474.9 million, respectively.

This report shows that with the increase of economic activity in Kosovo, similar to the situation in other countries, there was an increase in the level of prices. Based on the data of the Kosovo Agency of Statistics, the report shows that in 2021 there was an increase in consumer prices, production prices, import prices, and construction costs. According to the data presented in the report, in 2021, in addition to an increase in the Consumer Price Index by 3.1 percent, there is also an increase in the Producer Price Index by 4.2 percent, in the Import Price Index by 8.3 percent, and in the Construction Cost Index by 10.9 percent.

An examination of the wage level in Kosovo showed that the average net wage has changed over the years, while the minimum wage has remained at the same level. Therefore, some of the potential recommendations to mitigate the effect of price increases are the following: increase in minimum wage, increase in payments to beneficiaries of social assistance schemes, and step-up market monitoring by the Kosovo Competition Authority to detect ‘collusion.’

Please note that the full report is available attached to this email or by clicking here.