December 17 (SeeNews) - The International Monetary Fund (IMF) said on Friday it affirmed its forecast for North Macedonia's economic growth in 2021 at 4% and advised the government to focus on mitigating the economic impact of the pandemic and make progress on long-standing reform priorities.
North Macedonia's economic growth is seen slightly accelerating to 4.2% in 2022, driven mainly by strong domestic demand, the global lender said in a statement following Article IV consultations.
Economic recovery is underway, but low vaccine coverage and the global resurgence of the pandemic and new virus variants present downside risks to growth.
"Moreover, political instability could dampen confidence and hamper policy implementation. On the upside, a start of the EU accession negotiations could provide an impetus for reform, lifting growth," the IMF said, adding the government should press ahead with reforms such as further strengthening public financial management and revenue administration, and the financial safety net.
Average inflation in North Macedonia is forecast to reach 3.9% in 2022 as global energy and food prices may continue to rise, the IMF noted.
The country's fiscal deficit is expected to fall to 4.3% of GDP in 2022 from 5.9% in 2021.
"Staff recommend bringing the fiscal deficit close to 1 percent of GDP over the next five years, which would ensure that the government has adequate fiscal space to respond to any future shocks," the IMF said.
The IMF also advised North Macedonia's government to allocate additional funds in the budget to mitigate the impact of higher energy prices on households with lower incomes.
North Macedonia's economic output declined by an estimated 4.5% year-on-year in real terms in 2020, the country's statistical office said earlier, citing preliminary data.