10. Impact of COVID-19 in Kosovo
The health impact of COVID-19 in Kosovo was moderate. Authorities acted quickly to contain the spread of the virus, and took measures to mitigate the negative effects of restrictions on the economy. Yet, the medium- to long-term impact of the pandemic will largely depend on pre-existing socio-economic vulnerabilities. This chapter reviews the most binding of them. In particular, weaknesses in Kosovo’s health and social protection systems and high levels of unemployment and informality expose the economy strongly to the COVID-19 crisis. The COVID-19 pandemic increases the vulnerability of the unemployed, informal workers and people without social protection. Kosovo’s relatively sound public finances can help taking measures to attenuate the impact of the pandemic.
Kosovo has experienced four waves of the pandemic. Kosovo reported the first case of COVID-19 on 13 March 2020. On 17 March 2020, the president signed a decree to call a state of emergency. About three months later, there were around 1 500 cases (500 cases per million inhabitants) (Figure 10.1) and about 30 registered deaths (16 per million inhabitants) (Figure 10.2). Like most of the region, Kosovo has hitherto experienced four waves of the pandemic. On 26 May 2021, Kosovo counts an accumulated 103 599 cases and 2 176 registered deaths (55 312 cases per million inhabitants and 1 162 registered deaths per million inhabitants, on average). The fatality rate in Kosovo (around 2.6 registered deaths per 100 cases) is, however, higher than in other economies that have been more affected by the virus, namely Serbia (around 1.0 registered deaths per 100 cases).
Note: Kosovo reported its first registered COVID-19 case on 13 March 2020.
Source: Authors' calculation based on Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/.
Note: Kosovo registered the first COVID-19 death on 22 March.
Source: Authors' calculation based on Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/.
The government announced a range of stimulus measures amounting to 2.8% of GDP to support affected citizens and businesses. Government transfers to households went up by 38% (World Bank, 2021[2]).
Kosovo’s economy was heavily affected by the COVID-19 crisis. In 2020 Kosovo’s economy recorded a contraction of 6.9%, mainly due to declines in consumption, especially diaspora-related exports of travel services and investments. Government support, mainly surprising surges in both remittance receipts and exports (the latter among other causes due to higher demand for Kosovo’s nickel), helped avoid a deeper recession (World Bank, 2021[2]).
Kosovo’s relatively sound public finances can help in taking measures that attenuate the impact of COVID-19. Kosovo entered the crisis with some fiscal buffers and has considerable fiscal space to mitigate the effects of the crisis. Gross public debt accounts for around 18% of GDP, compared to an OECD average of 66.4% (Table 10.2). The government announced a range of measures in response to the crisis. In addition to the deferral of tax payments, it set up an emergency response package worth 2.8% of GDP. Despite sound public finances, the likely large revenue shortfall, combined with this fiscal stimulus, is expected to widen the budget deficit in 2020 (World Bank, 2020[4]).
The medium- to long-term impact of the COVID-19 pandemic on Kosovo will largely depend on pre-existing socio-economic vulnerabilities. Taking pre-existing vulnerabilities into account can help policy makers to determine who will need help the most and to design and target policies accordingly (Table 10.2). Kosovo is strongly exposed to the COVID-19 crisis through weaknesses in its health and social protection systems and high levels of unemployment and informality.
Material well-being and social protection
The short- and medium-term impact of COVID-19 increases the vulnerability of the most disadvantaged and risks compounding socio-economic divides. The unemployment rate was very high before COVID-19 (25.7%) and will likely increase due to the current economic and health crises (Table 10.2). Informal employment accounts for about 35% of total employment, and the current crisis may exacerbate the vulnerability of informal workers as their incomes decrease. This could widen the inequality gap and push many people below the poverty line. As many informal workers cannot afford to adhere to social distancing, they are more vulnerable to the pandemic (Gerdin and Kolev, 2020[17]).
The current crisis may disproportionately affect the many Kosovars without social protection coverage. Kosovo’s social protection spending (about 6.5% of GDP) is low compared to the OECD average (20.1%). The social protection system’s stringent eligibility criteria should be relaxed in light of the crisis, for example by covering near-poor households in the medium term and streamlining admission procedures for social assistance. Kosovo has no functioning unemployment, workplace disability or sick leave social insurance systems, although the government has announced that monthly wages will be covered for April and May by an amount equivalent to the minimum wage. The government needs to provide not only an emergency response to the pandemic but also a longer-term response to support households in coping with a very likely long-term economic crisis.
Health and non-material well-being
Kosovo’s healthcare system would require substantial investments in infrastructure, equipment and staff. It will be imperative to secure more funding for health care, despite the immediate pressure to cut health funds due to the economic downturn. Healthcare expenditures amounted to 1.6% of GDP in 2016 – the lowest among comparable economies – and represented 40% of the total annual needs for public health care (European Commission, 2018[18]). By 2018 total spending on healthcare had increased to 2.5% of GDP, but overall health expenditure remained the lowest in the region. Without publicly available health insurance, citizens were bearing an estimated 40% of total health care costs out of pocket (OOP) before the crisis, compared to an average of 13% in the OECD. Since many doctors and nurses migrated to work in Western Europe, medical staff shortages are a key challenge, as they are elsewhere in the region. Telemedicine is one way to deal with staff shortages in remote areas and might be particularly useful for easing increased pressure on the healthcare system due to COVID-19.
Other, non-material aspects of well-being are affected by the crisis. Quality of life is also about people’s relationships, which can provide a vital lifeline during crises and social distancing. Yet, 17% of Kosovars say that they have no relatives or friends they can count on for help in times of need. The considerable risks of social isolation and loneliness need to be addressed by policy measures for both physical and mental health, for instance regular check-ins by social services, civil society and volunteers, and promotion of digital technologies that connect people with each other and with public services (OECD, 2020[19]). Some 37.4% of men and 19.7% of women in Kosovo smoke daily, a risk factor associated with higher rates of mortality from COVID-19.
References
[6] BTI (2020), BTI 2020 Country Report: Albania, Bertelsmann Stiftung, Gütersloh, Germany, http://www.bti-project.org/en/reports/country-report-ALB-2020.html.
[5] Central Bank of the Republic of Kosovo (2019), Quaterly Assessment of Financial System, No. 25 Q IV/2018, Economic Analysis of the Financial Stability Department, Central Bank of the Republic of Kosovo, Pristina, https://bqk-kos.org/repository/docs/2015/CBK_Financial%20System_Q4_2018.pdf.
[18] European Commission (2018), Kosovo 2018 Report, Commission Staff Working Document, European Commission, Brussels, https://eeas.europa.eu/sites/eeas/files/01._kosovo_report_2018_0.pdf.
[17] Gerdin, A. and A. Kolev (2020), “Why protecting informal economy workers is so critical in time of COVID-19”, Development Matters blog, OECD Publishing, Paris, https://oecd-development-matters.org/2020/04/17/why-protecting-informal-economy-workers-is-so-critical-in-time-of-covid-19/ (accessed on 15 May 2020).
[7] Hasanaj, P. and A. Nimani (2019), “Tourism development of Kosovo as a tourist destination”, International Scientific Journal "Monte", Vol. 1, No. 1, Institute for Scientific Research and Development, Ulcinj, Montenegro, https://doi.org/10.33807/monte.1.201904248.
[10] IMF (2021), “World Economic Outlook Databases”, webpage, International Monetary Fund, Washington, D.C., https://www.imf.org/en/Publications/SPROLLs/world-economic-outlook-databases#sort=%40imfdate%20descending.
[9] IMF (2020), IMF Financial Soundness indicators, https://data.imf.org/?sk=51B096FA-2CD2-40C2-8D09-0699CC1764DA.
[8] IMF (2020), International Financial Statistics (dataset), International Monetary Fund, Washington, D.C., https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b (accessed on 15 May 2020).
[11] IMF (2019), World Economic Outlook, October 2019: Global Manufacturing Downturn, Rising Trade Barrier, International Monetary Fund, Washington, D.C., http://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019 (accessed on 18 May 2020).
[12] Kosovo Agency of Statistics (2020), Askdata (database), Kosovo Agency of Statistics, Pristina, https://askdata.rks-gov.net/PXWeb/pxweb/en/askdata/?rxid=4ccfde40-c9b5-47f9-9ad1-2f5370488312 (accessed on 16 April 2020).
[3] OECD (2020), “Covid-19 Policy Tracker” webpage, OECD, Paris, http://oecd.org/coronavirus/en/#country-policy-tracker (accessed on 20 May 2020).
[19] OECD (2020), Government at a Glance: Western Balkans, OECD Publishing, Paris, https://dx.doi.org/10.1787/a8c72f1b-en.
[13] OECD et al. (2019), SME Policy Index: Western Balkans and Turkey 2019: Assessing the Implementation of the Small Business Act for Europe, SME Policy Index, OECD Publishing, Paris, https://dx.doi.org/10.1787/g2g9fa9a-en.
[1] Our World in Data (2020), Our World in Data website, University of Oxford, Oxford, England, https://ourworldindata.org.
[14] WHO (2020), The Global Health Observatory (database), World Health Organization, Geneva, http://www.who.int/gho/database/en/ (accessed on 26 May 2020).
[2] World Bank (2021), Western Balkans Regular Economic Report: Subdued Recovery No. 19, World Bank Group, Washington, D.C., https://openknowledge.worldbank.org/bitstream/handle/10986/35509/Subdued-Recovery.pdf?sequence=1&isAllowed=y.
[4] World Bank (2020), “The Economic and Social Impact of Covid-19: The Country Notes”, World Bank Group, Washington, D.C., http://documents1.worldbank.org/curated/en/457181588085856454/pdf/The-Economic-and-Social-Impact-of-COVID-19-The-Country-Notes.pdf.
[15] World Bank (2020), World Development Indicators (database), DataBank, World Bank Group, Washington, D.C., https://databank.worldbank.org/source/world-development-indicators (accessed on 20 April 2020).
[16] WTTC (2020), World Travel & Tourism Council (database), World Travel & Tourism Council, London, https://wttc.org/Research/Economic-Impact/Data-Gateway.