Sokol HAVOLLI

1
The Role of Remittances for Kosovos Economy

• Sokol HAVOLLI
• Central Bank of the Republic of Kosovo
• Senior Economist

This presentation reflects the views of the
author and does not necessarily express the views
of the Central Bank of the Republic of Kosovo.
Remittances Study Launch 2010 November 2010,
Prishtina
2
Table of Contents

• Introduction and stylized facts
• Migrants Remittances
• Migrants Investments
• Policies Undertaken by Other Countries
• Conclusions

3
Introduction and stylized facts

• More than 75 of Kosovo emigrants are settled in
  Germany, Switzerland, Italy and Austria.
• The remainder in Scandinavian countries, UK,
  USA, France, etc.
• The host country is an important determinant of
  migrants earning potential.
• Estimates show that the yearly earnings of Kosovo
  migrants are over 4bn Euro.
• Savings and remittances compose 28 and 12 of
  total earnings, respectively.
• This shows that there is a substantial potential
  for investments in home country by the migrants.

4
Migrants Remittances
Figure 2 Remittances

• Remittances represent one of main components
  Current Accout.
• During 2009 remittances reached euro 505 million
  (14 of GDP)
• This represent a decrease of 5.5 compared to
  2008.
• Remittances decreased as a result of increasing
  unemployment in developed countries.
• In the first half of 2010, remittances increased
  by 1.3

5
Migrants Remittances
Figure 3 Remittances

• Remittances mostly used to finance consumption.
• Trivial part of remittances used to finance
  investments.
• Small portion of remittances is also used to
  finance
• Home repairs,
• Education,
• Health expenses.

6
Migrants Remittances

• The main determinants of remittances are
• Migrants income,
• Years since migration,
• Perceived business environment,
• Migrants investments in home country.

• This shows that, at least, the business
  environment could be improved in order to
  influence migrants remittances.

7
Migrants Investment

• Moreover, an empirical investigation shows that
  migrants investments are also highly dependent
  on
• Migrants perception about the business
  environment,
• Age of migrants
• Migrant earnings
• To date, there have been identified several
  important investments by migrants (i.e.
  participation of migrants in privatization around
  15 of total).
• However, migrants investments still do not
  represent an important driver for economic growth
  in Kosovo.

8
Policies Undertaken by Other Countries
9
Conclusions

• Migrants potential should be used and addressed.
  Especially knowing their potential for investment
  and remittances.
• Migrants investments would also be a very good
  signal for Foreign Direct Investors.
• Considerable proportion of FDI consists of joint
  investments of migrants and foreign investors.
• Kosovo should design policies which would be
  beneficial for migrants and increase its
  attractiveness to them