## IMF Executive Board Concludes 2020 Article IV Consultation with the Republic of Kosovo

_IMF News, February 17, 2021_

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## Bibliographic details
- Published: February 17, 2021

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### Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kosovo on February 17, 2021.
- Kosovo was hit hard by the COVID-19 pandemic, with estimated economic activity falling 6 percent in 2020.
- The outlook is subject to large uncertainty and depends on the evolution of the pandemic, the speed of vaccinations, and political developments.

### Economic impact and outlook
- 2020: Economic activity estimated to have fallen 6 percent.
- 2021 forecast: Real GDP growth of 4.5 percent, supported by continued fiscal stimulus and gradual relaxation of containment measures.
- Medium-term: Nominal GDP projected to return to pre-crisis levels by 2022 but remain below the pre-crisis trend for a protracted period.
- Structural reforms: Stronger implementation could mitigate longer-term scarring.

### Fiscal position and public finances
- 2020 fiscal deficit increased to 7.7 percent of GDP, reflecting a large fall in tax revenues and implementation of mitigation and recovery measures of 4.2 percent of GDP.
- Revenues and grants: 25.1 percent of GDP in 2020; projected 26.6 percent (2021), 26.2 percent (2022), 26.1 percent (2023).
- Expenditures: 32.5 percent of GDP in 2020; projected 29.1 percent (2021), 28.6 percent (2022), 28.7 percent (2023).
- Overall balance (fiscal rule): -5.8 (2019), -4.9 (2021), -1.7 (2022), -1.6 (2023).
- Overall balance (headline): -7.7 percent of GDP in 2020; projected -5.9 (2021), -2.5 (2022), -2.6 (2023).
- Stock of government bank balances: 4.7 percent of GDP in 2020.
- Total public debt: 24.5 percent of GDP in 2020; projected 30.4 (2021), 31.7 (2022), 32.9 (2023), 34.1 (2024), 34.1 (2025 appears listed only through 2025 row).

### External sector and reserves
- Current account deficit estimated at 7.5 percent of GDP in 2020, mainly due to a large decline in diaspora-related inflows, most notably in tourism.
- Remittance inflows: 13.7 percent of GDP in 2020; projected 13.9 (2021), 13.6 (2022), 13.3 (2023), 12.9 (2024), 12.5 (2025).
- Gross international reserves declined but remain adequate partly due to the purchase under the IMF’s Rapid Financing Instrument (RFI) in April 2020 and the use of other external financing.

### Financial sector resilience and risks
- Banks have weathered the recession well to date.
- High pre-COVID19 liquidity levels and ample capital buffers support system stability.
- Non-performing loans: data as of November 2020 (table entry present but numeric value not provided in text body).
- Regulatory capital to risk weighted assets: 18.1 (2017), 15.9 (2018), 16.7 (2019).
- Bank credit to the private sector (percent change): 11.5 (2017), 10.8 (2018), 10.0 (2019), 6.5 (2020), 9.1 (2021 proj), 10.3 (2022 proj), 7.5 (2023 proj), 7.0 (2024 proj).
- Deposits of the private sector (percent change): 5.3 (2017), 9.3 (2018), 15.6 (2019), 11.2 (2020), 7.2 (2021 proj), 6.7 (2022 proj).
- Directors recommended close monitoring of bank asset quality, ensuring transparency in reflecting losses once regulatory forbearance is lifted, further strengthening the AML/CFT framework, preserving capital standards, and replenishing capital buffers gradually.
- Directors encouraged filling existing central bank board vacancies as soon as possible.

### Executive Board assessment and key policy recommendations
- Commended authorities’ swift and comprehensive policy response to mitigate health, social, and economic impacts.
- Recommended policies remain broadly supportive and flexible given downside risks and uncertainty.
- Immediate priority: Continue supporting the economy until the recovery is well entrenched, while improving design, targeting, and transparency of support measures.
- Financing: Authorities encouraged to firm up the financing program for 2021 and consider contingency plans.
- Fiscal policy anchor: Revert to the fiscal rule after the recovery has taken hold.
- Consolidation focus: Improve targeting of social and economic transfers, revenue mobilization, and tax administration; conduct a comprehensive review of tax expenditures.
- Social protection: Welcome commitment to reform the social protection system to ensure equitable access.
- Public wage and pensions: Emphasized restraining public wage increases and assessing sustainability of the current pension system before amendments.
- Governance and public sector: Welcomed efforts to improve governance and modernize public sector administration; supported a special audit of COVID-related relief measures; encouraged strengthening management and supervision of public sector enterprises and increasing efficiency of public investment and subsidies.
- Structural reforms: Emphasized importance of accelerating reforms to address human capital and infrastructure gaps and improve the business environment.

### Selected economic indicators (high-level highlights from table)
- Population: 1.8 million (2018)
- Per Capita GDP: €3,947 (2019)
- Quota: SDR 82.6 million
- Poverty rate: 3.6 percent (2017) 1/
- Main exports: metals and mineral products (2019)
- Key export markets: Albania, Germany, Italy, Macedonia, Montenegro and Switzerland (2019)
- Real GDP growth: 4.2 (2017), 3.8 (2018), 4.9 (2019), -6.0 (2020), 4.5 (2021 proj), 5.5 (2022 proj), 4.0 (2023 proj)
- Official unemployment: 30.5 (2017), 29.6 (2018), 25.9 (2019), 24.6 (2020 as of Q3 2020)
- CPI, period average: 1.1 (2017), 0.2 (2018), 0.3 (2019)
- Real effective exchange rate (average; -=depreciation): 0.6 (2017), -0.1 (2018), 0.0 (2019)
- Current account balance, incl. official transfers: -5.4 (2017), -7.6 (2018), -5.5 (2019), -7.5 (2020), -6.4 (2021 proj), -6.1 (2022 proj), -4.8 (2023 proj)
- Financial account: -4.3 (2017), -5.0 (2018), -7.8 (2019), -5.6 (2020)

*IMF press release: IMF Executive Board Concludes 2020 Article IV Consultation with the Republic of Kosovo, February 17, 2021.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Republic of Kosovo and the IMF](http://www.imf.org/external/country/UVK/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/02/17/pr2144-kosovo-imf-executive-board-concludes-2020-article-iv-consultation_