IMF: Kosovo`s economy contracts by 6%
The Kosovo economy contracted by 6 percent in 2020 due to the COVID-19 pandemic, according to a report of the International Monetary Fund (IMF).
The Executive Board of the IMF announced to have concluded annual consultation with Kosovo and in its summarized views of Executive Directors of IMF published Wednesday concludes that Kosovo has been hit hard by the COVID-19 pandemic.
“Despite policy support, economic activity is estimated to have fallen 6 percent in 2020 on account of the combined effect of strict domestic containment measures and international travel restrictions,” the IMF says.
According to the report, the fiscal deficit increased to 7.7 percent of GDP, given the large fall in tax revenues and the implementation of mitigation and recovery measures of 4.2 percent of GDP. The current account deficit is estimated to have increased to 7.5 percent of GDP mainly due to a large decline in diaspora-related inflows, most notably in tourism.
Gross international reserves declined but remain adequate in part due to the purchase under the IMF’s Rapid Financing Instrument (RFI) in April 2020 and the use of another external financing. Banks have weathered the recession well to date, and the high pre-COVID19 liquidity levels and ample capital buffers bode well for the system’s stability.
According to the report, the executive directors commended the Kosovo authorities’ swift and comprehensive policy response, which has helped mitigate the health, social, and economic impact of the pandemic. Directors considered that policies should remain broadly supportive and flexible given downside risks and uncertainty. Noting that the crisis compounded pre-existing vulnerabilities, Directors emphasized the importance of reinvigorating structural reforms to promote stronger, more inclusive growth.