PRISTINA (Kosovo), February 5 (SeeNews) – Weak external competitiveness and high informality continue to constrain Kosovo’s economic growth potential, the International Monetary Fund (IMF) said.
Low labour force participation and high unemployment, particularly among young workers, and a large infrastructure gap are a drag on Kosovo's economic development, the executive board of the IMF said in a press release on Friday, following the conclusion of the 2017 Article IV consultation with Kosovo, part of the Fund's regular surveillance of all member countries.
On the bright side, the Fund noted that the fiscal deficit has been kept well below the 2% of GDP fiscal rule ceiling, government bank balances are above the minimum level of 4.5% of GDP, and public debt remains low, banks remain healthy and credit growth has increased.
"Notwithstanding, important structural challenges remain," the IMF said.
“While medium-term growth is now projected at around 4%, more and better growth is needed to accelerate income convergence with the EU and reduce inequality,” the IMF said.
The IMF also said that the trade deficit is expected to remain high, though on a declining path, but largely funded by non-debt creating inflows, namely remittances and FDI.
The IMF executive directors encouraged the Kosovo authorities to accelerate structural reforms to boost productivity and private sector development, and address the high informality as well as unemployment, particularly among the youth.
They welcomed Kosovo’s strong economic performance and progress made under the recent stand-by arrangement to advance macro-financial stability through fiscal discipline and financial sector reforms.
Directors commended the authorities for continued budget discipline and welcomed the adoption of the 2018 budget, which is aligned with the fiscal rule and strikes an appropriate balance between fiscal discipline and developmental needs.