Page 102 - SE Outlook Regions 2023

Household deposits accounted for the bulk of the total deposits and
were 11.3% higher y/y at over €3.5bn at the end of September.

Deposits of non-financial corporations increased 16.2% y/y to over
€1bn, while that of financial corporations rose 10.4% y/y to €240.8mn.

11 banks operate in Kosovo, of which nine are foreign-owned.

Net profit totalled €107.7mn at the end of September. The
non-performing loan (NPL) rate was 2.1% of the total loan portfolio.
The loan to deposit ratio was 80.4%, while the liquidity ratio stood at
35.1%.

Kosovo’s financial system successfully faced the biggest challenge in
the history of its operation, caused by the pandemic. However,
according to the central bank, the outbreak of war in Ukraine
interrupted the rapid post-pandemic growth trend and increased overall
risks to financial stability. Furthermore, the main risk for financial
stability in Kosovo comes from the macroeconomic environment. The
operational challenges for businesses, with special emphasis on
certain sectors, have increased due to the increase in the cost of inputs
but also the decrease in reliability that is expected to be reflected in the
decrease in demand. On the other hand, high inflation continues to
affect the decline in the purchasing power of households, with special
emphasis on those with lower incomes.

The International Monetary Fund (IMF) said that the central bank
should take note of the shifting macroeconomic environment when
supervising banks’ working assumptions for credit, liquidity, and
interest risks, and stand ready to take supervisory action when
warranted. To address possible liquidity shocks, systemic banks have
contingent credit lines with foreign financial institutions, and the CBK
has renewed its repo line with the ECB through early 2023, and intends
to negotiate its extension at that time. In particular, the monitoring of
the housing sector needs strengthening. Housing sector statistics are
poor, constraining the authorities’ ability to monitor this sector’s
developments.

3.5.3 Industry
Kosovo’s manufacturing sector grew by 7.8% y/y in the second quarter
of 2022 when the overall economy expanded by 2.1%.

NewCo Ferronikeli, a nickel production plant, is one of the largest
Kosovan exporters, accounting for about 40% of the country's exports.
The area surrounding the plant is rich with mineral deposits. In October
2021 it was forced to close production due to high power prices.

In September 2022, Albanian Balfin Group, which was the owner of
NewCo Ferronikeli since 2018, officially transferred all its shares and
ownership of NewCo Ferronikeli to Turkish YILDIRIM Group.

YILDIRIM has a solid business plan to expand and grow its metals and
mining business and is looking forward to making NewCo Ferronikeli

102 SE Outlook 2023 www.intellinews.com