Kosovo Political Economy Analysis

The Political Economy Analysis of Kosovo explicates key trends and identifies opportunities and challenges to needed reforms. Section II discusses the methodology of the report. Section III provides findings on current foundational factors, rules of the game, here and now, and dynamics. The final section presents the conclusions.

As Kosovo approaches 10 years of independence, the country can point to many notable successes. One is real progress in democratic consolidation. Kosovo has held three elections in its post-independence period and experienced peaceful transfers of power after each one. Along the same lines, elections at the national and local level are becoming increasingly competitive. Growing voter sophistication is also forcing political parties to develop clearer ideologies and increasing pressure on the government to implement needed economic and governance reforms. In addition, the Government of Kosovo (GOK)’s capacity to make and enforce its own policies is rising in certain key areas, most notably in macroeconomic management, where the government has put in place strong rules to enforce a high level of fiscal discipline. Similarly, the GOK has made notable progress in improving public financial management.

At the same time, there remain significant unmet expectations, especially among Kosovo’s large youth population, in regards to the international recognition of Kosovo as a sovereign and independent state, economic development, widespread poverty, improving governance, and combatting corruption. The latter is especially evident from the results of recent elections, where citizens voted decisively for change, and from public opinion polls showing low confidence in many key government institutions. Kosovo’s citizens are also feeling increasingly isolated due to lack of progress toward European Union (EU) integration and UN recognition. Currently, the status of both seem highly uncertain. Five EU members still do not recognize Kosovo and the country needs to undertake a range of very difficult reforms to become a candidate for EU membership. Along the same line, Russia, which, as a member of the U.N. Security Council, can block entry into the organization, stands opposed to Kosovo’s potential membership. In addition, Kosovo’s sovereignty remains incomplete as the Government of Serbia continues to block Kosovo’s membership in international organizations and exerts substantial influence on its domestic politics. Finally, there exists growing frustration with an economy that provides substantial benefits to those with the right political connections, but widespread unemployment and lack of economic opportunity for those who lack them.

As it approaches its 10th year as an independent state, Kosovo appears to be entering two transitional phases. The first is growing public pressure for political change, fueled by widespread perceptions of state capture, slow economic growth, high rates of unemployment, and external isolation. The second is rising demands from the international community on the GOK to make and enforce its own policies as levels of external support and attention decline. Both present significant challenges, and it remains unclear whether the GOK is prepared to enforce the elite accountability necessary to implement voter-demanded reforms or to undertake the difficult changes required to become a candidate for EU membership. There are signs of optimism, however, as some rising political leaders understand parties must change to meet rising public expectations through internal reform and more coherent policy positions. Yet, these changes may be slow, as older leaders across many parties are not yet prepared to cede power to a younger generation.