Sokol HAVOLLI Central Bank of the Republic of Kosovo Senior Economist The Role of Remittances for Kosovo’s Economy 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 Kosovo

1)Introduction and stylized facts 2)Migrants’ Remittances 3)Migrants’ Investments 4)Policies Undertaken by Other Countries 5)Conclusions Table of Contents:

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.

Migrants’ 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  Remittances decreased as a result of increasing unemployment in developed countries.  In the first half of 2010, remittances increased by 1.3% Figure 2: Remittances

Migrants’ 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. Figure 3: Remittances

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.

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.

Policies Undertaken by Other Countries

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