September 30 (SeeNews) - Macedonia should keep public debt below 50% of GDP and maintain monetary and financial sector stability, the International Monetary Fund (IMF) said on Friday.
IMF welcomed recent agreement among main political parties to hold elections on December 11, but expressed its fears that the prolonged political crisis in the country is starting to impact confidence and growth in the context of limited policy space.
"After strengthening in 2015, real GDP growth is projected to slow down to 2.2% in 2016 reflecting stalled investment and moderating credit growth due to political uncertainties," the IMF said in a statement after concluding a staff visit to Macedonia.
The IMF expects the country's economic growth to speed up to 3.2% next year.
The IMF said it assesses as positive Macedonia's current monetary policy which calls for keeping interest rates low. According to the fund, this has helped sustain robust private sector credit growth without jeopardizing external stability. However, in case of pressures on the exchange rate or the risk of deposit outflows, policy responses similar to those undertaken in April may be needed to ensure financial stability, the global lender said.
IMF expressed its concern about Macedonia's still very high jobless rate of 24%, which reflects skill shortage arising of emigration of skilled workers, low overall level of education and ageing of the population. This casts a lasting shadow on the longer-term economic outlook, the IMF fears. It recommends labour market reforms to be made.
To create policy space and counter risks, fiscal consolidation should start without delay, the IMF said.
"For 2016, given the caretaker government and little time left in the year, a small consolidation of 0.4 percent of GDP is recommended relying on scaling back of goods and services spending and collection of VAT arrears," the fund said.