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.
Multi-dimensional Review of the Western Balkans
10. Impact of COVID-19 in Kosovo
Abstract
Evolution 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).
Figure 10.1. Evolution of COVID-19 cases in the Western Balkans
Daily new confirmed COVID-19 cases per million inhabitants, rolling seven-day average
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/.
Figure 10.2. Registered deaths per million inhabitants in the Western Balkans
Cumulative number of confirmed COVID-19 deaths per million inhabitants
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/.
Policy responses and economic impact
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]).
Table 10.1. Policy measures in response to the COVID-19 pandemic
Source: OECD (2020[3]), “Covid-19 Policy Tracker”, webpage, http://oecd.org/coronavirus/en/#country-policy-tracker.
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]).
Coronavirus COVID-19
The analysis of policy responses to the COVID-19 pandemic does not reflect the policy development that occurred since February 2021, with the exception of the figures on testing and vaccination for which the most recent and internationally comparable data were used.
Dimensions of vulnerability to further socio-economic impact from COVID-19
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.
Table 10.2. Kosovo’s socio-economic exposure and policy resilience to COVID-19
Notes: Costa Rica officially became an OECD Member on 25 May 2021, therefore it is not included in the OECD averages in the current report. Household debt is defined as loans to households in Q4 2018 (EUR 998.5 million) divided by Kosovo’s GDP in 2018 (EUR 6 725.9 million). The level of vulnerability has been assessed by the OECD. 2019 is the latest year available unless otherwise specified. In particular:
*: 2018
**: 2017
***: 2016
Sources: Authors’ elaboration based on national and international data: Central Bank of the Republic of Kosovo (2019[5]), Quaterly Assessment of Financial System, https://bqk-kos.org/repository/docs/2015/CBK_Financial%20System_Q4_2018.pdf; Coppedge et al. (2020[6]), V-Dem Dataset -- Version 10 (dataset), www.v-dem.net/en/data/data/v-dem-dataset/; Hasanaj and Nimani (2019[7]), “Tourism development of Kosovo as a tourist destination”, http://dx.doi.org/10.33807/monte.1.201904248; IMF (2020[8]), International Financial Statistics (dataset), https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b; IMF (2020[9]), Financial Soundness Indicators (dataset), https://data.imf.org/?sk=51B096FA-2CD2-40C2-8D09-0699CC1764DA; IMF (2021[10]), “World Economic Outlook Databases”, www.imf.org/external/pubs/ft/weo/2020/01/weodata/index.aspx; IMF (2019[11]), World Economic Outlook, October 2019: Global Manufacturing Downturn, Rising Trade Barrier, www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019; Kosovo Agency of Statistics (2020[12]), Askdata (database), https://askdata.rks-gov.net/PXWeb/pxweb/en/askdata/?rxid=4ccfde40-c9b5-47f9-9ad1-2f5370488312; OECD et al. (2019[13]), SME Policy Index: Western Balkans and Turkey 2019: Assessing the Implementation of the Small Business Act for Europe, https://doi.org/10.1787/g2g9fa9a-en; WHO (2020[14]), Global Health Observatory, https://www.who.int/data/gho; World Bank (2020[15]), World Development Indicators (database), https://databank.worldbank.org/source/world-development-indicators; WTTC (2020[16]), World Travel & Tourism Council (database), https://wttc.org/Research/Economic-Impact/Data-Gateway.
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.
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