16 March 2022
An effective and equitable social protection system can help Kosovo to promote human capital, foster productivity, and reduce poverty. Since its independence in 2008, the country has made considerable socioeconomic progress, benefiting from the support of the international community and its own diaspora. Kosovo's economic growth has not been sufficient to reduce the high rates of unemployment or create formal jobs. It stands out as the Western Balkan country with the lowest labor market outcomes, especially for women, and is one of the poorest countries in Europe and the poorest in the Western Balkans, secondly to Albania. The recent Coronavirus (COVID-19) pandemic has highlighted the vulnerability of the population to the negative effects of shocks, which are anticipated to become more frequent with climate change. And yet, in contrast with other Western Balkan countries, Kosovo's working-age population is on the rise and the country stands to benefit from the demographic dividend. Kosovo can respond to these challenges and harness opportunities by investing in human capital while promoting employment and protecting those vulnerable to shocks. A strong social protection system can play an important role in promoting these objectives. This note presents a situational analysis of the social protection system of Kosovo. It assesses the extent to which the social protection system fulfils its purpose and proposes areas for reform in the short-, medium-, and long-term. The note is based on analysis of administrative data, the most recent European Union Survey on Individual Living Conditions (EIJ-SILC) and Household Budget Survey (HBS), a review of relevant literature, and engagement with technical experts in the Ministry of Finance, Labor and Transfers (MFLT) and with select development partners. The situational analysis of the social protection system in Kosovo unfolds as follows. After the introduction, section 2 reviews the country's main poverty and labor market outcomes; Section 3 provides a brief overview of the social protection system; Section 4 looks at non-contributory cash transfers to support the poor, vulnerable and disabled; Section 5 examines social services; Section 6 analyzes pensions; Section 7 explores employment and active labor market programs; Section 8 reviews the social protection response to the Coronavirus (COVID-19) pandemic; and Section 9 concludes by identifying the knowledge gaps and main areas for reform.