Annual Report 2010 03 August 2011 - Banka Qendrore e ...

CBK
Annual Report 2010
Cover Letter
It is my special honor and pleasure to present the Annual Report 2010, which represents a
comprehensive report, including the most significant developments in Kosovo’s economy,
covering the real, fiscal, financial and external sector. The Central Bank of the Republic of
Kosovo pays a particular attention, just like to any other duty, to the wider public
information, and this is exactly the reason why the CBK staff shows an extraordinary
commitment when drafting the Annual Report, making efforts to include each year
innovations and new data that explain and disclose all important functions exercised by the
CBK. The Annual Report 2010 has also innovations compared to last year’s report and it
also contains more data, which have been considered to be important to the wider public.
The World economy in 2010 recorded an annual growth of around 5%, which exceeded the
preliminary International Monetary Fund forecasts, and this growth was, first of all, driven
by the economic growth in the USA and Japan, the growth of industrial production,
stabilization of financial markets and growth in the World trade volume.
The first recuperation signs started to emerge in Southeastern Europe countries in 2010,
although the economic activity was still fragile and unbalanced among the SEE countries.
In 2010, an increase of exports was recorded in these countries, following a drastic decline
that was recorded in 2009, and as a result, all SEE countries other than Kosovo recorded a
decline in trade deficit, which also brought about a decline in current account deficit.
Kosovo economy in 2010 recorded a real growth of Domestic Gross Product of 4.0%, while
the GDP nominal value was euro 4.2 billion. Differently from 2009, where the growth was
mainly driven by the increase of public expenditures and decrease of prices, the growth in
2010 was driven by the increase of consumption and investments in private sector. An
average increase of prices of 3.5% was recorded during 2010, which was mainly driven by
the increase of prices of food products.
A serious problem for Kosovo also in 2010 keeps remaining the high unemployment rate,
which is estimated to be around 45%, of course, we have also to consider the fact that a
percentage of population reaching the labor age is not included at all in the labor market.
We have certainly to take into consideration herein a very high level of participation of
informal sector; therefore, this percentage should be smaller. This issue has become more
vulnerable by the young structure of Kosovo population, since a significant number of new
jobseekers add up in Kosovo on annual basis, while the number of jobs generated within a
year is quite low.
Kosovo financial sector did not continue growing as in the previous years, mainly due to a
slower growth in banking system, which has the largest share within the financial sector.
The growth of bank assets was around 11%, which is mainly driven by lending activity and
investments in securities. Slowdown in lending by banks had an impact on banks to
orientate a part of their investments abroad, mainly in securities. The increase of
investments in securities was also driven by recuperation of international financial markets
during this period. Loan structure was dominated by loans to enterprises (over 70%), while
among the enterprises the largest part of loans was used by trade enterprises (over 50%).
There is an increase of deposits during 2010 compared to 2009 (annual growth of 11%), yet
it was slower than in the previous year. Deposit structure was dominated by household
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