Impact of COVID-19

1. The outbreak of COVID-19 in Europe and the associated containment measures will severely curtail growth to -5 percent in 2020. Tourism receipts, remittances and FDI are all expected to plummet due to travel restrictions and the effect of the pandemic in remittance-originating countries. Domestic containment measures and heightened uncertainty will hit demand. The use of deposit buffers by liquidity constrained households and businesses, and loan reprogramming will affect bank liquidity and constrain domestic credit, which is expected to decrease by about 4 percent in real terms.

2. Before the COVID-19 outbreak, growth in Kosovo was expected to moderate to a little over 3.5 percent this year (4 percent in 2019), on the back of domestic political stalemate and softer growth in advanced Europe. Inflation was projected to decline to 1.4 percent (2.7 percent in 2019), as the effect of the import tariffs on Serbia and Bosnia and Herzegovina petered out. While the fiscal deficit was expected at 2.8 percent of GDP, public debt—below 20 percent of GDP—was considered at low risk of distress. The banking sector was well capitalized and liquid. The external sector assessment suggested a moderate REER overvaluation (of around 5 percent), while gross international reserves were in line (or below) standard and multidimensional adequacy metrics.

Kosovo: Selected Economic Indicators 2020 Pre- COVID19 and Current Projections

(Percent, unless otherwise indicated)

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/For fiscal rule purposes, excludes post-July 2015 investment projects fiannced with IFI loans and privatization proceeds.

^2/Includes guarantees.

^3/Total foreign assistance excluding capital transfers.

Kosovo: Selected Economic Indicators 2020 Pre- COVID19 and Current Projections

(Percent, unless otherwise indicated)

				2020
				Pre-COVID19	Current
				Proj.	Proj.
Real GDP growth				3.6	-5.0
Price changes
	CPI, period average			1.4	1.3
	CPI, end of period			1.9	1.6
General government budget (percent of GDP)
	Revenues and grants			26.1	24.4
	Expenditures			28.9	29.2
		Of which: Wages and salaries		8.7	9.5
			Subsidies and transfers	8.5	11.5
			Capital and net lending	6.9	2.9
	Overall Balance (Fiscal rule) 1/			-1.5	-3.4
	Overall balance			-2.8	-4.8
	Stock of government bank balances			4.5	3.8
	Total public debt 2/			18.2	20.7
Balance of Payments (percent of GDP)
	Current account balance, incl. official transfers			-6.3	-7.4
		Of which: Official transfers 3/		2.9	3.0
		Of which: Remittance inflows		12.1	11.1
	Financial account			-4.9	-6.0
	Errors and Omissions			1.6	1.5
Financial Sector
	Bank credit to the private sector (percent change)			8.2	-2.4
	Deposits of the private sector (percent change)			5.8	-4.2
Memorandum items:
	GDP (millions of euros)			7,483	6,877

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/For fiscal rule purposes, excludes post-July 2015 investment projects fiannced with IFI loans and privatization proceeds.

^2/Includes guarantees.

^3/Total foreign assistance excluding capital transfers.

View Table

Kosovo: Selected Economic Indicators 2020 Pre- COVID19 and Current Projections

(Percent, unless otherwise indicated)

				2020
				Pre-COVID19	Current
				Proj.	Proj.
Real GDP growth				3.6	-5.0
Price changes
	CPI, period average			1.4	1.3
	CPI, end of period			1.9	1.6
General government budget (percent of GDP)
	Revenues and grants			26.1	24.4
	Expenditures			28.9	29.2
		Of which: Wages and salaries		8.7	9.5
			Subsidies and transfers	8.5	11.5
			Capital and net lending	6.9	2.9
	Overall Balance (Fiscal rule) 1/			-1.5	-3.4
	Overall balance			-2.8	-4.8
	Stock of government bank balances			4.5	3.8
	Total public debt 2/			18.2	20.7
Balance of Payments (percent of GDP)
	Current account balance, incl. official transfers			-6.3	-7.4
		Of which: Official transfers 3/		2.9	3.0
		Of which: Remittance inflows		12.1	11.1
	Financial account			-4.9	-6.0
	Errors and Omissions			1.6	1.5
Financial Sector
	Bank credit to the private sector (percent change)			8.2	-2.4
	Deposits of the private sector (percent change)			5.8	-4.2
Memorandum items:
	GDP (millions of euros)			7,483	6,877

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/For fiscal rule purposes, excludes post-July 2015 investment projects fiannced with IFI loans and privatization proceeds.

^2/Includes guarantees.

^3/Total foreign assistance excluding capital transfers.

3. The large decline in growth will significantly weaken public finances. Fiscal revenues are expected to decrease by 12 percent in 2020, given abrupt falls in VAT and custom duties. Additional spending to mitigate the COVID-19 impact (for about 2.5–3.5 percent of GDP) will need to be accommodated mainly by spending reallocations, as the primary expenditure envelope is projected to decrease by 4.5 percent. The overall fiscal deficit will nonetheless soar to 4.8 percent of GDP, while the deficit according to the fiscal rule definition (which allows to accommodate investment financed by donors and privatization proceeds), is expected at 3.4 percent of GDP, much larger than the 2 percent of GDP ceiling. Though the looser fiscal stance is warranted to address the economic fallout of the virus outbreak, a larger fiscal deficit may compromise limited (euro-denominateStatistics government deposits.

Kosovo: Quarterly Real GDP Growth Rate

(y/y percent change)

Citation: IMF Staff Country Reports 2020, 112; 10.5089/9781513540993.002.A001

Sources: Kosovo Agency of Statistics (2013 Q1–2019 Q31 and IMF staff calculations (3019 04–2030 Q4).

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Kosovo: Quarterly Real GDP Growth Rate

(y/y percent change)

Citation: IMF Staff Country Reports 2020, 112; 10.5089/9781513540993.002.A001

Sources: Kosovo Agency of Statistics (2013 Q1–2019 Q31 and IMF staff calculations (3019 04–2030 Q4).

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Kosovo: Quarterly Real GDP Growth Rate

(y/y percent change)

Citation: IMF Staff Country Reports 2020, 112; 10.5089/9781513540993.002.A001

Sources: Kosovo Agency of Statistics (2013 Q1–2019 Q31 and IMF staff calculations (3019 04–2030 Q4).

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4. The current account will deteriorate while external financing inflows will be cut by half, creating an urgent balance of payments need. Tourism receipts are projected to decrease by about 20 percent in 2020 as diaspora-related travel comes to a halt in Q2 due to travel restrictions, causing heavy losses to the hospitality industry.¹ Exports of goods will decrease by 17 percent due to the global recession, as Kosovo’s foreign sales are largely composed by metals. Remittances are forecast to fall by 10 percent in 2020 because of the effect of the pandemic in remittance-originating countries. Compensation of Kosovans working abroad on temporary work permits is expected to decrease by 19 percent, as travel restrictions will reduce the number of work permits granted. All this will lead to a deterioration of the current and capital account deficits to 7.8 percent of GDP (5.6 percent of GDP in 2019). At the same time, FDI and other financial flows (which are heavily linked with the diaspora) are expected to be cut by half, to 3.6 percent of GDP in 2020 (7 percent in 2019). As a result, a Kosovo will face a temporary and urgent financing gap of 4.1 percent of GDP.

Kosovo; Financing Gap

(Euro millions, unless otherwise noted)

Source: IMF staff calculations.

Kosovo; Financing Gap

(Euro millions, unless otherwise noted)

		2019	2020
Current and Capital Account Deficit (A)		400	534
	percent of GDP	5.6	7.8
	Current Account Deficit	392	525
	Capital Account Deficit	8	9
Financial and FDI Inflows (B)		495	250
	percent of GDP	7.0	3.6
	FDI Inflows	201	152
	Portfolio Investment	-59	21
	Other Investment (inc. Errors and Omissions)	353	78
Financing Gap (C = A- B)		-95	284
	percent of GDP	-1.3	4.1
Financinjs(D)		0	75
	percent of GDP	0.0	1.1
	IMF RFI Financing	0	51
	Additional EU Grants	0	16
	Additional WB Loans	0	8
CBK Reserve Accumulation (D – C)		95	-209
	percent of GDP	1.3	-3.0

Source: IMF staff calculations.

View Table

Kosovo; Financing Gap

(Euro millions, unless otherwise noted)

		2019	2020
Current and Capital Account Deficit (A)		400	534
	percent of GDP	5.6	7.8
	Current Account Deficit	392	525
	Capital Account Deficit	8	9
Financial and FDI Inflows (B)		495	250
	percent of GDP	7.0	3.6
	FDI Inflows	201	152
	Portfolio Investment	-59	21
	Other Investment (inc. Errors and Omissions)	353	78
Financing Gap (C = A- B)		-95	284
	percent of GDP	-1.3	4.1
Financinjs(D)		0	75
	percent of GDP	0.0	1.1
	IMF RFI Financing	0	51
	Additional EU Grants	0	16
	Additional WB Loans	0	8
CBK Reserve Accumulation (D – C)		95	-209
	percent of GDP	1.3	-3.0

Source: IMF staff calculations.

Policy Issues and Discussions

5. The government responded quickly to contain the propagation of COVID-19. Kosovo’s first few cases of the virus were announced in mid-March and the number of confirmed cases reached 126 as of April 3. A “Coronavirus Management Committee” was set up to enhance preparedness and propose measures to contain the propagation of the virus. In addition, the government decreed the temporary closures of schools, universities and all non-essential businesses, social distancing, and travel and movement restrictions. Air travel between Kosovo and risk countries has been banned, and health monitoring in airports and borders increased.

6. Fiscal measures have rightly focused on mitigating the effect of the crisis on businesses and households and on creating room for increased health spending. The total cost of measures is estimated at 2.5–3.5 percent of GDP. Key actions include: (i) transfers to SMEs and other sectors most affected by the lockdown; (ii) advancing payment for social assistance schemes by one month to support families in need; (iii) extra allocations to the health ministry to procure medical gear; (iv) deferrals of corporate and personal income taxes, and VAT; (v) temporary removal of VAT on imports of wheat and flour; and (vi) deferral of public utilities payments until end April. These measures will be accommodated within a reduced total expenditure envelope through spending reallocations within goods and services and out of capital spending. Given the heightened uncertainty, staff urged the authorities to contain other fiscal risks, including those arising from the implementation of public administration reform (PAR) laws approved in 2019, and highlighted the need to limit fiscal risks of the proposed emergency measures.² Staff further advised to preserve buffers of the Privatization Agency of Kosovo (PAK). Staff broadly agreed on deferring VAT payments, but cautioned against deferring VAT filings and extending VAT removals or reductions. Staff further impressed on the authorities the importance of ensuring business continuity of PFM systems. The authorities agreed with staff.

7. Staff’s updated assessment of public debt indicates that it will remain sustainable (Annex 1). Assuming the deviation from the fiscal deficit rule is temporary and that the rule is reinstated from 2022 onwards, public debt will increase to about 28 percent of GDP by 2025. As Kosovo does not have external market access, extending the maturity of domestic debt, diversifying the sources of financing, and making more use of the available IFI loans for capital investment projects remain key policy priorities to contain financing risks.

8. The Central Bank’s decision to suspend loan repayments by borrowers affected by the COVID-19 (through end-April) is appropriate, but staff strongly cautioned against weakening provisioning or capital standards. The Central Bank of Kosovo (CBK) together with the Kosovo Banking Association decided to suspend the payment of loan instalments for businesses and individuals from March 16 to April 30, with the option to extend it further. Suspension decisions will be made by banks on a case-by-case basis, and be targeted to sectors and individuals most affected by the crisis. The CBK will apply regulatory forbearance on loan provisions and capital requirements on reprogrammed loans. The banking system is in a position to absorb this measure, as banks’ NPLs remain low and liquidity and capital buffers comfortably within regulatory limits. Staff strongly cautioned against any weakening of provisioning or capital standards and urged the CBK to work with banks on capital restoration plans over a reasonable period in case minimum capital gets compromised. Staff highlighted that forbearance does not offer permanent solutions, and thus, that bank-specific plans will help to gradually restore capital and liquidity ratios after the crisis has passed. Staff urged for intensive supervision of banks with more concentrated portfolios and riskier clients. The authorities concurred.

Access and Capacity to Repay the Fund

9. The Kosovan authorities have requested a purchase under the Rapid Financing Instrument in the amount of SDR 41.30 million (about Euro 51 million), equivalent to 50 percent of quota. The proposed RFI purchase (0.7 percent of GDP) would contribute towards closing around 20 percent of the external financing gap in 2020. The remaining gap will be covered by other donor resources (additional EU grants and World Bank financing for 0.4 percent of GDP) and reserve losses (3 percent of GDP). The RFI objectives are to provide support to address urgent balance of payments needs, containment and mitigation efforts, and preserve fiscal buffers. The RFI could also catalyze support by other IFIs, which are actively exploring options. No prior actions are proposed.

10. Kosovo’s capacity to repay its obligations to the Fund is adequate (Table 8). IMF credit outstanding after the RFI (at end-2020) will amount to 114 percent of quota. The associated servicing risks are mitigated by the country’s low indebtedness. The debt sustainability analysis shows debt to be sustainable with a sufficient buffer to remain sustainable even after the impact of the virus (Annex 1). Moreover, Kosovo has appropriate capacity to repay the Fund, and has a good track record of timely payment of external obligations.

Table 1.

Kosovo: Select Economic Indicators, 2017–2025

(Percent, unless otherwise indicated)

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/2019 as of Q4 2019.

^2/2019 as of November 2019.

^3/For fiscal rule purposes, only projects post-July 2015 apply.

^4/Includes guarantees, but no longer includes former Yugoslavia debt which has been reclassified as a contingent liability.

^5/Total foreign assistance excluding capital transfers.

^6/2019 as of November 2019.

Table 1.

Kosovo: Select Economic Indicators, 2017–2025

(Percent, unless otherwise indicated)

					2017	2018	2019	2020	2021	2022	2023	2024	2025
							Proj.	Proj.	Projections
Real GDP growth					4.2	3.8	4.0	-5.0	7.5	3.7	3.8	3.9	4.0
	Contribution to growth (percentage points of GDP)
		Consumption			1.5	5.2	3.0	0.4	2.5	4.2	3.6	3.3	3.6
			Private		1.6	4.0	2.3	-0.4	2.9	3.7	3.5	3.2	3.3
			Public		-0.1	1.2	0.6	0.8	-0.4	0.5	0.2	0.2	0.3
		Investment			1.5	2.3	0.7	-5.7	4.7	0.8	1.7	1.7	1.8
		Net Exports			1.2	-3.7	0.2	0.2	0.3	-1.3	-1.5	-1.2	-1.3
			Exports		4.0	1.0	1.5	-3.4	4.1	1.3	1.1	1.4	1.5
			Imports		-2.8	-4.7	-1.2	3.7	-3.8	-2.6	-2.6	-2.6	-2.8
	Real growth rate (percent)
		Consumption			1.5	5.4	2.8	-0.6	3.6	3.9	3.6	3.5	3.3
			Private		1.8	5.0	2.5	-1.5	4.4	4.0	4.0	3.8	3.6
			Public		-0.5	7.5	4.0	5.0	-1.2	3.0	1.2	1.4	1.7
		Investment			5.6	8.1	2.3	-20.9	21.0	2.6	6.2	6.4	6.1
		Exports			16.8	3.8	5.4	-13.7	17.8	4.5	3.9	5.3	5.0
		Imports			5.4	9.0	2.1	-7.9	8.5	4.6	4.8	4.9	4.9
Official unemployment (percent of workforce) 1/					30.5	29.6	25.9	…	…	…	…	…	…
Price changes
	CPI, period average				1.5	1.1	2.7	1.3	1.6	1.8	1.8	1.9	1.9
	CPI, end of period				0.5	2.9	1.2	1.6	1.9	1.8	1.8	1.8	1.8
	GDP deflator				1.4	1.0	1.9	1.6	1.1	1.5	1.7	1.8	1.5
	Real effective exchange rate (average; -=depreciation) 2/				0.6	2.7	-0.1	…	…	…	…	…	…
	Terms of Trade				98	97	96	95	93	92	92	92	91
General government budget (percent of GDP)
	Revenues and grants				26.2	26.1	26.5	24.4	25.5	25.5	25.5	25.5	25.6
	Expenditures				27.4	29.0	29.4	29.2	28.2	27.7	27.8	28.0	28.1
		Of which: Wages and salaries			8.6	8.8	8.6	9.5	8.8	9.1	9.1	9.1	9.1
				Subsidies and transfers	8.0	8.3	8.8	11.5	8.8	8.5	8.3	8.0	7.7
				Capital and net lending	7.0	7.9	7.4	2.9	5.6	5.2	5.7	6.2	6.7
	Overall Balance (Fiscal rule) 3/				-1.1	-1.5	-0.7	-3.4	-2.1	-1.5	-1.5	-1.5	-1.5
	Overall balance				-1.2	-2.9	-2.8	-4.8	-2.7	-2.3	-2.4	-2.5	-2.5
	Stock of government bank balances				4.6	4.5	5.2	3.8	4.5	4.5	4.5	4.5	4.5
	Total public debt 4/				16.2	16.9	17.5	20.7	22.7	24.1	25.4	26.8	28.1
Balance of Payments (percent of GDP)
	Current account balance, incl. official transfers				-5.4	-7.6	-5.5	-7.4	-5.1	-5.6	-6.0	-6.1	-6.4
		Of which: Official transfers 5/			3.1	3.4	3.4	3.0	2.5	2.3	2.2	2.1	2.0
		Of which: Remittance inflows			11.8	11.9	12.0	11.1	11.8	12.0	12.1	12.2	12.4
	Financial account				-4.3	-5.0	-2.6	-6.0	-3.2	-3.8	-4.1	-4.2	-4.5
		Of which: Direct investment, net			-3.3	-3.4	-2.8	-2.2	-3.2	-3.2	-3.2	-3.2	-3.2
				Portfolio investment, net	0.2	-3.0	0.8	-0.3	-0.2	1.4	0.8	0.4	0.5
	Errors and Omissions				1.3	2.7	3.0	1.5	2.0	2.0	2.0	2.0	2.0
Savings-investment balances (percent of GDP)
	National savings				19.5	18.5	20.3	13.9	19.8	19.2	19.6	20.4	20.9
		Public savings			5.8	5.0	4.4	-2.3	2.9	2.9	3.3	3.7	4.2
		Private savings			13.7	13.5	15.9	16.1	16.9	16.3	16.3	16.7	16.7
	Investment				28.1	29.5	29.2	24.3	27.4	27.2	27.9	28.6	29.3
		Public investment			7.0	7.9	7.4	2.9	5.6	5.2	5.7	6.2	6.7
		Private investment			21.0	21.6	21.8	21.4	21.8	22.0	22.2	22.4	22.6
	Current account, excl. official transfers				-8.5	-10.9	-8.9	-10.4	-7.6	-8.0	-8.2	-8.2	-8.4
Financial Sector
	Non-performing loans (percent of total loans) 6/				3.1	2.5	2.0	…	…	…	…	…	…
	Bank credit to the private sector (percent change)				11.5	10.8	10.0	-2.4	9.1	6.6	6.8	7.1	7.4
	Deposits of the private sector (percent change)				5.3	9.3	15.6	-4.2	12.4	8.1	7.0	7.1	7.1
	Regulatory capital to risk weighted assets 6/				18.1	17.0	16.6	…	…	…	…	…	…
Memorandum items:
	GDP (millions of euros)				6,414	6,726	7,125	6,877	7,476	7,870	8,305	8,784	9,276
	GDP per capita (euros)				3,566	3,752	3,959	3,805	4,120	4,320	4,541	4,783	5,031
	GNDI per capita (euros)				4,172	4,391	4,667	4,456	4,880	5,132	5,407	5,707	6,017
	Real GDP growth per capita				3.4	4.1	3.6	-5.4	7.1	3.3	3.4	3.5	3.6
	Population (millions)				1.8	1.8	1.8	1.8	1.8	1.8	1.8	1.8	1.8

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/2019 as of Q4 2019.

^2/2019 as of November 2019.

^3/For fiscal rule purposes, only projects post-July 2015 apply.

^4/Includes guarantees, but no longer includes former Yugoslavia debt which has been reclassified as a contingent liability.

^5/Total foreign assistance excluding capital transfers.

^6/2019 as of November 2019.

View Table

Table 1.

Kosovo: Select Economic Indicators, 2017–2025

(Percent, unless otherwise indicated)

					2017	2018	2019	2020	2021	2022	2023	2024	2025
							Proj.	Proj.	Projections
Real GDP growth					4.2	3.8	4.0	-5.0	7.5	3.7	3.8	3.9	4.0
	Contribution to growth (percentage points of GDP)
		Consumption			1.5	5.2	3.0	0.4	2.5	4.2	3.6	3.3	3.6
			Private		1.6	4.0	2.3	-0.4	2.9	3.7	3.5	3.2	3.3
			Public		-0.1	1.2	0.6	0.8	-0.4	0.5	0.2	0.2	0.3
		Investment			1.5	2.3	0.7	-5.7	4.7	0.8	1.7	1.7	1.8
		Net Exports			1.2	-3.7	0.2	0.2	0.3	-1.3	-1.5	-1.2	-1.3
			Exports		4.0	1.0	1.5	-3.4	4.1	1.3	1.1	1.4	1.5
			Imports		-2.8	-4.7	-1.2	3.7	-3.8	-2.6	-2.6	-2.6	-2.8
	Real growth rate (percent)
		Consumption			1.5	5.4	2.8	-0.6	3.6	3.9	3.6	3.5	3.3
			Private		1.8	5.0	2.5	-1.5	4.4	4.0	4.0	3.8	3.6
			Public		-0.5	7.5	4.0	5.0	-1.2	3.0	1.2	1.4	1.7
		Investment			5.6	8.1	2.3	-20.9	21.0	2.6	6.2	6.4	6.1
		Exports			16.8	3.8	5.4	-13.7	17.8	4.5	3.9	5.3	5.0
		Imports			5.4	9.0	2.1	-7.9	8.5	4.6	4.8	4.9	4.9
Official unemployment (percent of workforce) 1/					30.5	29.6	25.9	…	…	…	…	…	…
Price changes
	CPI, period average				1.5	1.1	2.7	1.3	1.6	1.8	1.8	1.9	1.9
	CPI, end of period				0.5	2.9	1.2	1.6	1.9	1.8	1.8	1.8	1.8
	GDP deflator				1.4	1.0	1.9	1.6	1.1	1.5	1.7	1.8	1.5
	Real effective exchange rate (average; -=depreciation) 2/				0.6	2.7	-0.1	…	…	…	…	…	…
	Terms of Trade				98	97	96	95	93	92	92	92	91
General government budget (percent of GDP)
	Revenues and grants				26.2	26.1	26.5	24.4	25.5	25.5	25.5	25.5	25.6
	Expenditures				27.4	29.0	29.4	29.2	28.2	27.7	27.8	28.0	28.1
		Of which: Wages and salaries			8.6	8.8	8.6	9.5	8.8	9.1	9.1	9.1	9.1
				Subsidies and transfers	8.0	8.3	8.8	11.5	8.8	8.5	8.3	8.0	7.7
				Capital and net lending	7.0	7.9	7.4	2.9	5.6	5.2	5.7	6.2	6.7
	Overall Balance (Fiscal rule) 3/				-1.1	-1.5	-0.7	-3.4	-2.1	-1.5	-1.5	-1.5	-1.5
	Overall balance				-1.2	-2.9	-2.8	-4.8	-2.7	-2.3	-2.4	-2.5	-2.5
	Stock of government bank balances				4.6	4.5	5.2	3.8	4.5	4.5	4.5	4.5	4.5
	Total public debt 4/				16.2	16.9	17.5	20.7	22.7	24.1	25.4	26.8	28.1
Balance of Payments (percent of GDP)
	Current account balance, incl. official transfers				-5.4	-7.6	-5.5	-7.4	-5.1	-5.6	-6.0	-6.1	-6.4
		Of which: Official transfers 5/			3.1	3.4	3.4	3.0	2.5	2.3	2.2	2.1	2.0
		Of which: Remittance inflows			11.8	11.9	12.0	11.1	11.8	12.0	12.1	12.2	12.4
	Financial account				-4.3	-5.0	-2.6	-6.0	-3.2	-3.8	-4.1	-4.2	-4.5
		Of which: Direct investment, net			-3.3	-3.4	-2.8	-2.2	-3.2	-3.2	-3.2	-3.2	-3.2
				Portfolio investment, net	0.2	-3.0	0.8	-0.3	-0.2	1.4	0.8	0.4	0.5
	Errors and Omissions				1.3	2.7	3.0	1.5	2.0	2.0	2.0	2.0	2.0
Savings-investment balances (percent of GDP)
	National savings				19.5	18.5	20.3	13.9	19.8	19.2	19.6	20.4	20.9
		Public savings			5.8	5.0	4.4	-2.3	2.9	2.9	3.3	3.7	4.2
		Private savings			13.7	13.5	15.9	16.1	16.9	16.3	16.3	16.7	16.7
	Investment				28.1	29.5	29.2	24.3	27.4	27.2	27.9	28.6	29.3
		Public investment			7.0	7.9	7.4	2.9	5.6	5.2	5.7	6.2	6.7
		Private investment			21.0	21.6	21.8	21.4	21.8	22.0	22.2	22.4	22.6
	Current account, excl. official transfers				-8.5	-10.9	-8.9	-10.4	-7.6	-8.0	-8.2	-8.2	-8.4
Financial Sector
	Non-performing loans (percent of total loans) 6/				3.1	2.5	2.0	…	…	…	…	…	…
	Bank credit to the private sector (percent change)				11.5	10.8	10.0	-2.4	9.1	6.6	6.8	7.1	7.4
	Deposits of the private sector (percent change)				5.3	9.3	15.6	-4.2	12.4	8.1	7.0	7.1	7.1
	Regulatory capital to risk weighted assets 6/				18.1	17.0	16.6	…	…	…	…	…	…
Memorandum items:
	GDP (millions of euros)				6,414	6,726	7,125	6,877	7,476	7,870	8,305	8,784	9,276
	GDP per capita (euros)				3,566	3,752	3,959	3,805	4,120	4,320	4,541	4,783	5,031
	GNDI per capita (euros)				4,172	4,391	4,667	4,456	4,880	5,132	5,407	5,707	6,017
	Real GDP growth per capita				3.4	4.1	3.6	-5.4	7.1	3.3	3.4	3.5	3.6
	Population (millions)				1.8	1.8	1.8	1.8	1.8	1.8	1.8	1.8	1.8

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/2019 as of Q4 2019.

^2/2019 as of November 2019.

^3/For fiscal rule purposes, only projects post-July 2015 apply.

^4/Includes guarantees, but no longer includes former Yugoslavia debt which has been reclassified as a contingent liability.

^5/Total foreign assistance excluding capital transfers.

^6/2019 as of November 2019.

Table 2.

Kosovo: Consolidated Government Budget, 2017–2025 ^1/

(Excluding donor designated grants, millions of euros)

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/Does not yet reflect the GFSM 2014 methodology.

^2/For fiscal rule purposes, IFI and PAK-financed projects post-July 2 015 are excluded from the fiscal deficit. Following the LPFMA, the fiscal rule deficit also excludes expenditures from carried-forward own-source revenue (OSR) and PAK-related expenditure.

^3/The stock of public debt no longer includes the former Yugoslavia debt, which has been reclassified as a contingent liability.

^4/Based on current legislation and preliminary budget execution as of end-December 2019.

Table 2.

Kosovo: Consolidated Government Budget, 2017–2025 ^1/

(Excluding donor designated grants, millions of euros)

							2017	2018	2019		2020		2021		2022		2023	2024	2025
							Act.	Act.	Budget	Proj. 4/	Draft Budget	Proj.	MTEF	Proj.	MTEF	Proj.	Proj.	Proj.	Proj.
Revenue and grants							1,682	1,757	1,949	1,889	2,021	1,677	2,159	1,907	2,276	2,005	2,114	2,236	2,373
	Revenue						1,682	1,757	1,939	1,877	2,010	1,653	2,149	1,907	2,265	2,005	2,114	2,236	2,373
		Taxes					1,496	1,564	1,731	1,662	1,784	1,453	1,924	1,683	2,032	1,768	1,862	1,967	2,087
			Direct taxes				238	268	289	292	313	226	327	291	347	307	324	343	363
						Personal income tax	137	153	163	166	175	137	182	176	192	185	195	207	218
						Corporate income tax	75	87	91	95	101	61	105	84	110	89	94	100	106
						Property tax	22	24	30	27	33	24	37	26	41	27	29	31	33
						Other	3	4	4	5	4	5	4	5	4	5	6	6	6
			Indirect taxes				1,315	1,344	1,492	1,415	1,521	1,272	1,648	1,447	1,737	1,520	1,601	1,691	1,795
						VAT	756	799	905	846	934	741	989	886	1,048	943	1,006	1,076	1,154
						Excise	432	419	465	435	460	418	511	451	533	470	493	519	553
						Customs	126	124	120	130	123	112	142	108	152	104	98	93	86
						Other	1	2	2	4	4	2	5	3	5	3	3	3	3
			Tax refunds				-58	-48	-50	-46	-50	-46	-51	-55	-52	-59	-63	-67	-72
		Nontax revenues					186	193	208	215	226	199	224	224	233	237	252	269	287
						Interest income	…	2	4	3	4	3	4	3	3	3	3	3	3
						Fees and other charges	39	34	44	40	46	42	50	44	53	46	48	51	54
						Municipal own-source revenues	43	46	57	50	50	45	50	54	50	58	64	70	76
						Other, including Central own-source revenues	103	110	103	122	126	110	120	124	127	130	137	145	153
	Grants						0	0	11	12	11	24	11	0	11	0	0	0	0
Expenditure							1,759	1,949	2,379	2,091	2,440	2,008	2,535	2,110	2,603	2,183	2,311	2,455	2,608
	Current expenditure						1,307	1,419	1,590	1,561	1,669	1,809	1,710	1,693	1,757	1,776	1,841	1,911	1,986
			Wages and salaries				550	592	620	616	650	650	691	660	730	718	756	797	843
			Goods and services				226	250	337	294	352	338	357	343	360	349	356	363	370
			Subsidies and transfers				512	558	600	627	632	789	629	657	633	671	686	702	718
			Current reserves				0	0	5	0	5	0	5	0	5	0	0	0	0
			Interest payment				19	19	28	23	30	31	28	32	30	38	43	49	55
	Capital expenditure						452	530	789	531	771	199	825	417	846	407	471	545	622
		Budget-financed capital expenditure					452	446	515	385	520	151	616	369	647	347	398	457	527
		PAK-financed capital expenditure					0	84	151	132	85	10	0	0	0	0	0	0	0
		IFI-financed capital expenditure					0	0	123	14	166	39	209	49	199	61	73	88	95
Primary balance							-59	-176	-406	-182	-394	-303	-351	-174	-301	-144	-157	-174	-183
Overall balance							-78	-192	-430	-203	-420	-331	-376	-203	-328	-179	-197	-219	-234
Overall balance (Fiscal rule) 2/							-71	-102	-146	-50	-140	-236	-159	-154	-120	-118	-125	-132	-139
Overall cyclically adjusted balance							-91	-220	…	-269	…	-277	…	-196	…	-177	-198	-221	-235
Statistical discrepancy							6	12	…	-1	…	0	…	0	…	0	0	0	0
Financing							72	180	426	204	510	331	376	203	328	179	197	219	234
	Foreign financing						46	-12	127	-12	147	10	162	-32	180	20	24	26	44
			Drawings/ Borrowings, incl. official financing				8	10	54	25	45	16	…	8	…	8	8	8	8
			Donor financing for new projects				0	0	123	14	166	39	…	49	…	61	73	88	95
			IMF financing				95	0	0	0	45	51	…	0	…	0	0	0	0
			Amortization/ Repayments				-57	-22	-50	-50	-110	-95	…	-88	…	-48	-56	-69	-59
	Domestic financing						9	183	320	171	345	311	125	185	133	119	143	173	180
			Domestic borrowing (net)				95	102	135	115	130	167	130	308	130	176	192	215	212
					Drawings		370	627	…	360	…	444	…	627	…	532	577	676	694
					Amortization		-275	-319	…	-245	…	-278	…	-319	…	-355	-385	-461	-481
			Change in GG Deposits at the CBK				-95	58	…	47	…	145	…	-113	…	-48	-40	-32	-22
					Change in PAK deposits (- = increase)		-10	83	…	113	…	7	…	-40	…	-30	-20	-10	0
						Privatization receipts	-17	-9	…	-44	…	-10	…	-40	…	-30	-20	-10	0
						Use of privatization revenues	6	93	153	157	91	17	2	0	2	0	0	0	0
						o/w for PAK-funded investment clause projects	0	86	151	150	85	10	0	0	0	0	0	0	0
						o/w for PAK-related current expenditure	6	6	2	7	6	7	2	0	2	0	0	0	0
					Change in municipalities OSR (– = increase)		-6	-1 5	23	-7	22	40	6	0	6	0	0	0	0
					Change in GG free bank balances (- = increase)		-79	-10	-21	-59	18	98	88	-73	15	-18	-20	-22	-22
					Change in other GG bank balances (- = increase)		0	0	…	0	…	0	…	0	…	0	0	0	0
			Other financing				9	22	11	9	11	0	11	0	11	0	0	0	0
	Equity ( Sale of State Assets)						17	9	…	44	…	10	…	40	…	30	20	10	0
Memorandum items
Bank balance of the general government							292	302	340	370	340	263	247	336	231	354	374	395	417
		Of which: ELA					46	46	46	46	46	46	46	46	46	46	46	46	46
Total public debt 3/							1,041	1,138	1,468	1,245	1,517	1,422	1,845	1,698	2,158	1,894	2,111	2,352	2,608
			External debt				423	417	659	409	595	419	793	387	975	407	431	457	501
			Domestic debt				618	721	810	836	922	1,003	1,052	1,311	1,182	1,487	1,680	1,894	2,107
				Of which: guarantees			44	44	…	44	…	44	…	44	…	44	44	44	44
Contingent liabilities: debt of the former Yugoslavia							287	198	…	181	…	162	…	141	…	117	97	69	65

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/Does not yet reflect the GFSM 2014 methodology.

^2/For fiscal rule purposes, IFI and PAK-financed projects post-July 2 015 are excluded from the fiscal deficit. Following the LPFMA, the fiscal rule deficit also excludes expenditures from carried-forward own-source revenue (OSR) and PAK-related expenditure.

^3/The stock of public debt no longer includes the former Yugoslavia debt, which has been reclassified as a contingent liability.

^4/Based on current legislation and preliminary budget execution as of end-December 2019.

View Table

Table 2.

Kosovo: Consolidated Government Budget, 2017–2025 ^1/

(Excluding donor designated grants, millions of euros)

							2017	2018	2019		2020		2021		2022		2023	2024	2025
							Act.	Act.	Budget	Proj. 4/	Draft Budget	Proj.	MTEF	Proj.	MTEF	Proj.	Proj.	Proj.	Proj.
Revenue and grants							1,682	1,757	1,949	1,889	2,021	1,677	2,159	1,907	2,276	2,005	2,114	2,236	2,373
	Revenue						1,682	1,757	1,939	1,877	2,010	1,653	2,149	1,907	2,265	2,005	2,114	2,236	2,373
		Taxes					1,496	1,564	1,731	1,662	1,784	1,453	1,924	1,683	2,032	1,768	1,862	1,967	2,087
			Direct taxes				238	268	289	292	313	226	327	291	347	307	324	343	363
						Personal income tax	137	153	163	166	175	137	182	176	192	185	195	207	218
						Corporate income tax	75	87	91	95	101	61	105	84	110	89	94	100	106
						Property tax	22	24	30	27	33	24	37	26	41	27	29	31	33
						Other	3	4	4	5	4	5	4	5	4	5	6	6	6
			Indirect taxes				1,315	1,344	1,492	1,415	1,521	1,272	1,648	1,447	1,737	1,520	1,601	1,691	1,795
						VAT	756	799	905	846	934	741	989	886	1,048	943	1,006	1,076	1,154
						Excise	432	419	465	435	460	418	511	451	533	470	493	519	553
						Customs	126	124	120	130	123	112	142	108	152	104	98	93	86
						Other	1	2	2	4	4	2	5	3	5	3	3	3	3
			Tax refunds				-58	-48	-50	-46	-50	-46	-51	-55	-52	-59	-63	-67	-72
		Nontax revenues					186	193	208	215	226	199	224	224	233	237	252	269	287
						Interest income	…	2	4	3	4	3	4	3	3	3	3	3	3
						Fees and other charges	39	34	44	40	46	42	50	44	53	46	48	51	54
						Municipal own-source revenues	43	46	57	50	50	45	50	54	50	58	64	70	76
						Other, including Central own-source revenues	103	110	103	122	126	110	120	124	127	130	137	145	153
	Grants						0	0	11	12	11	24	11	0	11	0	0	0	0
Expenditure							1,759	1,949	2,379	2,091	2,440	2,008	2,535	2,110	2,603	2,183	2,311	2,455	2,608
	Current expenditure						1,307	1,419	1,590	1,561	1,669	1,809	1,710	1,693	1,757	1,776	1,841	1,911	1,986
			Wages and salaries				550	592	620	616	650	650	691	660	730	718	756	797	843
			Goods and services				226	250	337	294	352	338	357	343	360	349	356	363	370
			Subsidies and transfers				512	558	600	627	632	789	629	657	633	671	686	702	718
			Current reserves				0	0	5	0	5	0	5	0	5	0	0	0	0
			Interest payment				19	19	28	23	30	31	28	32	30	38	43	49	55
	Capital expenditure						452	530	789	531	771	199	825	417	846	407	471	545	622
		Budget-financed capital expenditure					452	446	515	385	520	151	616	369	647	347	398	457	527
		PAK-financed capital expenditure					0	84	151	132	85	10	0	0	0	0	0	0	0
		IFI-financed capital expenditure					0	0	123	14	166	39	209	49	199	61	73	88	95
Primary balance							-59	-176	-406	-182	-394	-303	-351	-174	-301	-144	-157	-174	-183
Overall balance							-78	-192	-430	-203	-420	-331	-376	-203	-328	-179	-197	-219	-234
Overall balance (Fiscal rule) 2/							-71	-102	-146	-50	-140	-236	-159	-154	-120	-118	-125	-132	-139
Overall cyclically adjusted balance							-91	-220	…	-269	…	-277	…	-196	…	-177	-198	-221	-235
Statistical discrepancy							6	12	…	-1	…	0	…	0	…	0	0	0	0
Financing							72	180	426	204	510	331	376	203	328	179	197	219	234
	Foreign financing						46	-12	127	-12	147	10	162	-32	180	20	24	26	44
			Drawings/ Borrowings, incl. official financing				8	10	54	25	45	16	…	8	…	8	8	8	8
			Donor financing for new projects				0	0	123	14	166	39	…	49	…	61	73	88	95
			IMF financing				95	0	0	0	45	51	…	0	…	0	0	0	0
			Amortization/ Repayments				-57	-22	-50	-50	-110	-95	…	-88	…	-48	-56	-69	-59
	Domestic financing						9	183	320	171	345	311	125	185	133	119	143	173	180
			Domestic borrowing (net)				95	102	135	115	130	167	130	308	130	176	192	215	212
					Drawings		370	627	…	360	…	444	…	627	…	532	577	676	694
					Amortization		-275	-319	…	-245	…	-278	…	-319	…	-355	-385	-461	-481
			Change in GG Deposits at the CBK				-95	58	…	47	…	145	…	-113	…	-48	-40	-32	-22
					Change in PAK deposits (- = increase)		-10	83	…	113	…	7	…	-40	…	-30	-20	-10	0
						Privatization receipts	-17	-9	…	-44	…	-10	…	-40	…	-30	-20	-10	0
						Use of privatization revenues	6	93	153	157	91	17	2	0	2	0	0	0	0
						o/w for PAK-funded investment clause projects	0	86	151	150	85	10	0	0	0	0	0	0	0
						o/w for PAK-related current expenditure	6	6	2	7	6	7	2	0	2	0	0	0	0
					Change in municipalities OSR (– = increase)		-6	-1 5	23	-7	22	40	6	0	6	0	0	0	0
					Change in GG free bank balances (- = increase)		-79	-10	-21	-59	18	98	88	-73	15	-18	-20	-22	-22
					Change in other GG bank balances (- = increase)		0	0	…	0	…	0	…	0	…	0	0	0	0
			Other financing				9	22	11	9	11	0	11	0	11	0	0	0	0
	Equity ( Sale of State Assets)						17	9	…	44	…	10	…	40	…	30	20	10	0
Memorandum items
Bank balance of the general government							292	302	340	370	340	263	247	336	231	354	374	395	417
		Of which: ELA					46	46	46	46	46	46	46	46	46	46	46	46	46
Total public debt 3/							1,041	1,138	1,468	1,245	1,517	1,422	1,845	1,698	2,158	1,894	2,111	2,352	2,608
			External debt				423	417	659	409	595	419	793	387	975	407	431	457	501
			Domestic debt				618	721	810	836	922	1,003	1,052	1,311	1,182	1,487	1,680	1,894	2,107
				Of which: guarantees			44	44	…	44	…	44	…	44	…	44	44	44	44
Contingent liabilities: debt of the former Yugoslavia							287	198	…	181	…	162	…	141	…	117	97	69	65

Sources: Kosovo authorities; and IMF staff estimates and projections.

^1/Does not yet reflect the GFSM 2014 methodology.

^2/For fiscal rule purposes, IFI and PAK-financed projects post-July 2 015 are excluded from the fiscal deficit. Following the LPFMA, the fiscal rule deficit also excludes expenditures from carried-forward own-source revenue (OSR) and PAK-related expenditure.

^3/The stock of public debt no longer includes the former Yugoslavia debt, which has been reclassified as a contingent liability.

^4/Based on current legislation and preliminary budget execution as of end-December 2019.