Serbia’s GDP in 2019 will be from 0.5 to 0.7 percentage points lower if Kosovo does not abolish the 100 percent import tariffs on goods from Serbia and Bosnia introduced last November, an economist says as quoted by the Beta news agency on Thursday.

Ivan Nikolic, an associate to the Macroeconomic Analysis and Trends (MAT), told reporters the export to Kosovo would be a significant challenge for Serbia’s economy this year.

Pristina has introduced the 10 percent taxes and then increased them to 100 percent, and recently expanded the tariffs to foreign goods made in Serbia, despite being asked by the European Union and the US to revoke the decision.

The EU High Representative and the mediator in the Belgrade – Pristina dialogue on normalisation of relations Federica Mogherini has repeatedly demanded the abolishment of the tariffs, warning Pristina they violated the Central European Free Trade Agreement (CEFTA) and the Stabilisation and Association Agreement (SAA) which Kosovo has with Brussels.

The EU-sponsored dialogue has been on halt and Belgrade says it won’t resume before the import duties are abolished.

However, Prime Minister Ramush Haradinaj said the measure would be withdrawn after Belgrade recognised Kosovo’s independence, which Serbia’s authorities say will never do.

In the meantime, President Hashim Thaci reportedly promised the decision would be reversed soon, intensifying speculations that the two have been at odds since the President advocates border correction with Belgrade and Prime Minister rejects the idea, saying it would lead to new catastrophe.

“If the taxes are not annulled this year and the export to Kosovo is not normalised, the GDP will drop from 0.5 to 0.7 percentage points, which is not a bit,” Nikolic said.

Another economist, Stojan Stamenkovic told the news conference that in the first ten months of 2018 Serbia exported food worth 74 million Euros to Kosovo, while after the first 10 percent increase in taxes the export dropped to 3.2 million Euros a month.

He said that was just a portion of overall damage the tariffs inflicted to Serbia’s economy since a total worth of goods exported to Kosovo last year was 393 million Euros.

Pristina decided to punish Belgrade after Kosovo failed to join Interpol. The authorities in Serbia’s former autonomous province blamed the failure on the Belgrade diplomatic campaign.