The negative trade balance in Kosovo continues with imports (3.3 billion Euro) largely outweighing exports (475 million Euro), in 2020. According to the data of Kosovo Statistics Agency, almost the majority (45.8%) of imports come from EU countries, whereas the bulk of exports (44.4%) is directed towards CEFTA countries.

The parties of the CEFTA agreement are Albania, Bosnia and Herzegovina, Kosovo, Moldova, Montenegro, North Macedonia, and Serbia. CEFTA is built on the principles of the World Trade Organization and the European Union. This agreement is especially important for Kosovan firms as they may place their products in larger and freer markets. Moreover, this allows small companies to become more competitive and rely less on government subsidies, to gain new industry expertise, and benefit from cross-country technology transfer.

However, despite the initial positive expectations from the CEFTA agreement, Kosovo still experiences an overall trade deficit. This happens because of barriers, mainly political, imposed by other member countries and high production costs which hinders competitiveness of Kosovan firms in CEFTA region. To overcome the latter, Kosovan firms should:

1. Increase the production capacities: this in turn would decrease the production cost per unit and enable more favorable prices which ultimately would improve the competitive landscape of Kosovan firms in CEFTA market.
2. Expand the list of local suppliers: the costs of acquiring raw materials from distant suppliers increases the final price, and this is the case for a large majority of Kosovan firm. Therefore, Kosovan MSMEs should consider alternative suppliers, mainly local or from close partner countries. The shift towards local supplier can have another positive effect, meaning it would decrease the import and improve the overall trade balance.
3. Expanding the trade to EU beyond F&F (families and friends): One more option for increasing the total export value of Kosovo MSMEs is exporting to EU more. Normally the main target customers in EU happens to be relatives and friends constituting the diaspora of Kosovo in EU. Even though it has a facilitating effect for MSMEs for starting to export to EU, there is also a negative side. The family member or the friend that MSME from Kosovo is approaching are mainly either payroll staff or small business owners. In either case it is not the best scenario for an MSME to start to or increase the value of export. That’s why MSMEs in Kosovo should try harder to find real target customer groups in EU countries other than diaspora.