Abstract

Although technical assistance from the IMF’s Statistics Department is helping to define a program to regularize the collection and reporting of statistics, reliable estimates will depend on data from upcoming surveys. Until then, estimates of the size of the economy of Kosovo are based on partial information, potentially unreliable observations, and some educated guesswork.

Estimating GDP

Although technical assistance from the IMF’s Statistics Department is helping to define a program to regularize the collection and reporting of statistics, reliable estimates will depend on data from upcoming surveys. Until then, estimates of the size of the economy of Kosovo are based on partial information, potentially unreliable observations, and some educated guesswork.

The IMF staff’s estimate of GDP presented in Table 1 is based on the expenditure approach. The main data sources and assumptions underlying the estimate are as follows.

  • Private consumption is based on an August 1999 survey of 500 households conducted by RUN- VEST, a local think tank, which estimated daily average consumption at $2.57. For 2000, this estimate is rounded up to $2.75. As well as humanitarian aid, private remittances from abroad provide significant support for consumption. Informal estimates put the number of remitters at about 200,000 making an average monthly remittance of DM 500-1,000. At the low end of this range, total private remittances would amount to some $570 million in 2000, or roughly $1,500 a year per family living in Kosovo.

  • Public consumption is estimated from informa tion on the execution of the central budget for 2000. No estimate is factored in for the value of services provided by the parallel system that continues to function at the local level, although this is partly picked up in the estimate of private consumption.

  • Donor-financed capital projects account for most investment. Based on information from the UNMIK Department of Reconstruction, foreign-financed reconstruction inflows for 2000 are estimated to be $360 million (DM 750 mil lion), of which about $250 million is for rehabilitation of housing and other buildings. Private sector investment is estimated at about half this amount on the assumption that housing reconstruction is matched by a large local effort—although this is largely guesswork be cause there are no systematic surveys. Private investment would amount to about 30 percent of private remittances, consistent with anecdotal evidence that a significant part of money sent home from abroad is used for house construction.

  • Imports are estimated from a variety of sources. First, import duty receipts are consistent with $390 million in dutiable declared imports for 2000. To correct for underinvoicing, smuggling, and delays in establishing border points, this number is augmented by 80 percent, a factor based on experiences from other economies in the region—particularly Bosnia and Herzegovina—bringing total dutiable imports to $710 million. Second, based on discussions with the Department of Reconstruction, donor-financed reconstruction inflows are as sumed to have a 90 percent (nondutiable) import content. Third, electricity imports are es timated at $26 million in 2000. Fourth, based on information from the UN Food and Agriculture Organization (FAO) and donor groups, imports of humanitarian assistance for 2000 are estimated at about $150 million. Such assistance comprises food aid (wheat and wheat flour) ($60 million); agricultural assistance and supplies ($15 million); emergency social welfare ($50 million);12 and donations of equipment ($10 million), medical supplies and essential drugs ($10 million), and education materials ($5 million). Total imports add up to $1.2 billion.

  • Based on customs data, exports are expected to amount to less than $1 million in 2000, reflecting limited online productive capacity. There is, however, reportedly some unrecorded two-way trade taking place with the rest of the FRY.

Taken together, the above information implies GDP for 2000 equal to $1.4 billion, or DM 3 billion. With the population of Kosovo estimated to be currently 1.9 million, per capita GDP is thus about $750. This would be about twice as high as a much-quoted preconflict estimate based on official Yugoslav data by the independent research group RIINVEST. However, the earlier estimate probably grossly undervalued GDP. Among other things, it was based on the concept of gross social product, which neglected value-added from services, and likely undervalued the contribution of the ethnic Albanian majority. Taking into account the size of private remittances and official funding for reconstruction, budgetary support, and humanitarian aid, national income would amount to DM 4.5 billion, equivalent to $1,130 per capita.13

The estimate of GDP is subject to a sizable degree of uncertainty. Given its large relative size (136 percent of GDP), the estimate is particularly sensitive to different assumptions about private consumption. For example, if daily consumption is increased to $3 from $2.75 (only about 10 percent greater), per capita GDP would rise to about $825, assuming no offsetting upward revision to imports. Such a higher figure might plausibly go with a higher estimate of private remittances, which in turn might argue for a somewhat higher level of private investment. However, there is also significant likelihood that GDP is overestimated, through either an underestimation of unrecorded imports or perhaps an unwarranted rounding up of daily consumption levels.

12

Includes monthly food baskets valued at DM 80. With the introduction of means testing, the share of families receiving emergency assistance declined from about 60 percent at the beginning of the year to about 20 percent by July 2000.

13

No allowance is made for debt service, which in principle is accruing and would lower this estimate somewhat.