The IMF said that its Executive Board has concluded the Article IV consultation and the first post-programme monitoring (PPM) with Macedonia, a release on the fund’s website informs. The main goal of PPM is closer monitoring of the policies of member countries that have substantial IMF debt outstanding after the expiration of their arrangements. The IMF said that baseline growth is expected to reach 2% this year, provided that public infrastructure works and foreign investment projects speed up as planned. The downside risks come from weak external environment and difficult liquidity conditions for the country’s private sector. Inflation is seen to decrease to 2.5% in 2013.
The IMF noted that the deficit in Q1 2013 was 2.4% of projected 2013 GDP or already two-thirds of the full-year target of 3.5% of GDP. Revenues were influenced by large VAT refunds, in line with the government’s commitment to clear arrears. The IMF assessed that “further expenditure compression will likely be needed to meet the deficit target.” As of the time of the mission visit, the authorities were not mulling a budget revision, claiming that the required adjustment could be accommodated within normal buffers, given current revenue trends.
The IMF’s Executive Board agreed that the near-term policy mix should remain supportive. However, the directors also assessed that a well-articulated and credible medium-term strategy should anchor fiscal policy. They also stressed that a larger focus on multi-annual budgeting will help in the assessment of fiscal space and avoiding payment arrears. The directors also recommended the implementation of measures for improving fiscal management, including public financial management.
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