High unemployment and poverty remain two of the most critical problems facing Kosovo today. Public opinion polls over the past few years have indicated that economic concerns have consistently been the primary source of discontent for the majority of Kosovans, with less than a quarter of the population indicating satisfaction with their personal economic situation. The high percentage of people living in Kosovo willing to protest for economic reasons (EWS, 79% in April 2009) indicates the dire need for fast and sustainable economic progress in order to promote and maintain social peace. An analysis of recent trends and macroeconomic indicators however, does not reveal a particularly positive outlook in this regard.

Following years of trade balance deterioration, Kosovo now faces a trade deficit of 1.8 billion euro. Poor infrastructure, political and legal uncertainty have resulted in only limited foreign direct investment, making the economy dependent on the service sector, international aid and remittances from the Kosovan diaspora. Although there is a solid foundation for private sector development, the uncompetitive nature of its manufacturing base and its reliance on retail and trade, makes the need for private sector development critical.

Private sector development is also indispensable for improvement of the labour market. The lack of significant economic growth over the past few years (Kosovo’s economic growth rate remains one of the lowest in the Balkan region) has had negative effects on the labour market situation, which continues to be one of the most alarming features of Kosovo’s economy.  Unemployment has risen to almost 45 per cent, the highest rate in Europe.  

Youth unemployment in Kosovo is five times higher than the average within the European Union, a particular cause for concern considering that Kosovo has the youngest population in Europe (15-24 year olds making up 20 percent of the population). It has been estimated that roughly 200,000 young people will reach working age in the next five years, while the number of people reaching retirement age will be approximately 60,000.In a place with an estimated 45 per cent poverty rate the urgent need for economic improvement, especially of the labour market, is indisputable. As a consequence, only 5-6,000 out of the 30,000 new job seekers entering the labour will find employment. Combined with political and social dissatisfaction these trends could have potentially consequences.

To this end, the Economic Development and Private Sector Programme has developed a series of projects geared towards supporting economic and social development by increasing the role of the private sector as a generator of wealth, improving youth employment possibilities and facilitating trade policy formulation.