The International Monetary Fund (IMF) said on June 6 that Kosovo’s economic performance remains solid, but fiscal risks have increased.

The IMF recently projected that the Kosovan economy will grow by an annual 4% in 2018, 2019 and 2023. Kosovo posted strong GDP growth of 4.1% in 2017.

The statement was released after an IMF mission led by Stephanie Eble visited Pristina in the period May 30 to June 5, to discuss recent economic developments and Kosovo’s economic outlook.

The IMF said that the Kosovan government’s policies should focus on limiting fiscal risks to preserve a sustainable budget and protect productive spending, including capital investments in priority sectors.

Decisive implementation of structural reforms remains essential to achieve stronger and sustainable growth, which is expected at about 4% in 2018, it said.

"Inflation remains subdued and the external current account deficit has narrowed, in part due to statistical revisions," according to the IMF.

The implementation of the 2018 budget was assessed to be broadly on track with some revenue shortfalls and overruns in social spending, which are a result of lack of implementation of benefit scheme reforms, expected to be offset by savings in other areas.

However, the IMF warned that fiscal risks have increased and advised the authorities not to move ahead with the current draft law on compensation of teachers, due to its large direct and indirect fiscal costs that will burden the budget for many years.

It also advised Kosovo not to introduce any new untargeted social benefit programmes, to accelerate the restructuring of the public enterprise sector, to design the public administration reform within the limits of the wage bill rule and carefully monitor the issuance of government guarantees that could significantly increase the public debt.

The IMF mission also recommended that the authorities accelerate structural reforms to support private sector development to achieve stronger and sustainable growth needed for the country to reduce the large income gap with the rest of Europe and address high unemployment.

In this regard, the mission reiterated the need to advance the implementation of education, governance, infrastructure, labour market, health and tax administration reforms.