## IMF Staff Completes Virtual Staff Visit to Kosovo

_IMF News, June 18, 2021_

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## Bibliographic details
- Published: June 18, 2021

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### Mission summary
- An International Monetary Fund (IMF) mission, led by Gabriel Di Bella, conducted a virtual staff visit to Kosovo during June 7-17, to discuss recent economic developments and policies.
- End-of-Mission statement conveys preliminary findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- Staff will prepare a report, subject to management approval, for discussion and decision by the IMF's Executive Board.

### Growth outlook and scenarios
- IMF staff assessment: "Economic activity in 2021 is expected to expand by about 5 – 6 percent on account of an ambitious vaccine rollout program, and the reopening of the borders which hails strong diaspora summer travel."
- If realized, economic gains in 2021 should offset last year’s pandemic-induced losses of 4 – 5 percent.
- Risk scenarios:
  - Upside: Faster-than-expected vaccine rollout both in Kosovo and abroad could boost travel and unlock pent-up demand.
  - Downside: New virus variants could lead to higher infection rates and threaten economic gains.
- Overall: "The growth outlook remains very uncertain."

### Fiscal policy findings and recommendations
- Near-term stance: "Fiscal policy in the near term should remain supportive as a hedge against risks."
- Use of realized revenue gains: Can be used to support workers and firms most affected by the pandemic and to ensure a swift and efficient vaccine rollout, "without affecting the budgeted fiscal balance."
- Cautionary guidance:
  - Avoid increasing expenditures on account of unrealized revenues to prevent further depletion of fiscal buffers, increased public debt, and the need for expenditure cuts later on.
  - A phased approach and contingency planning are paramount.
- Medium-term fiscal framework: New policy initiatives should be framed within a medium-term fiscal path anchored in credible revenue and financing projections that stabilize the public debt ratio and rebuild fiscal and external buffers.
- Specific fiscal measures:
  - Continue efforts to improve revenue collection.
  - Improve targeting of social spending.
  - Ensure the wage bill remains within its legal ceiling.
  - Increase the growth dividend of public investment.

### Banking sector assessment and financial stability
- Current resilience: "The banking sector has weathered the crisis well. Low non-performing loans (NPLs) and adequate capital and funding buffers have allowed credit to keep flowing."
- Near-term risks: NPLs will rise as regulatory flexibility and temporary fiscal support are gradually phased out.
- Priorities:
  - Monitor bank asset quality.
  - Ensure that losses are adequately and transparently reflected once regulatory forbearance is lifted.
  - Fill existing vacancies at the Central Bank Board "with the shortest possible delay."

### Structural and medium-term priorities
- Balance policy objectives: New initiatives need to strike the right balance between promoting social cohesion and increasing potential growth.
- Structural reform focus areas:
  - Strengthen social infrastructure.
  - Promote digitalization.
  - Gradually reduce pollution and Kosovo’s carbon footprint.
- Expected outcomes: These measures "will all contribute to faster increases in human capital and productivity, and prepare the economy for the post-pandemic challenges."

### Closing remarks
- IMF staff: "We would like to thank our counterparts for excellent discussions and engagement."
- Continued engagement: IMF staff look forward to continuing the dialogue during the upcoming 2021 Article IV consultations in September this year.

*Press Release No. 21/185 — June 18, 2021*

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## References

- [Republic of Kosovo and the IMF](http://www.imf.org/external/country/UVK/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2021/06/17/pr21185-kosovo-imf-staff-completes-virtual-staff-visit-to-kosovo_