- The Washington-based lender said Kosovo's gross domestic product will lose 6 percentage points this year because of diaspora flows.
- Financial policies should continue mitigating the shock of the pandemic to incomes without endangering banking sector stability.
SARAJEVO: Kosovo's economy is likely to shrink by 7.5% in 2020 due to the impact of the COVID-19 pandemic, but should rebound by 6% in 2021, the International Monetary Fund said on Thursday.
In a report following a virtual visit to the small Balkan economy, the Washington-based lender said Kosovo's gross domestic product will lose 6 percentage points this year because of diaspora flows.
It cautioned however that the baseline projection was largely uncertain because weaker external growth and longer travel restrictions could magnify the shock and have a grave impact on public health and the economy.
The lender, which in April approved a 51.6 million euro ($60.7 million) loan for Kosovo to tackle the economic crisis caused by the coronavirus, also warned that ongoing political division could complicate the implementation of recovery measures.
It said that while the suspension of limits on government spending over 2020-21 was warranted, the authorities need to commit to its gradual reinstatement as the economic recovery takes hold.
Financial policies should continue mitigating the shock of the pandemic to incomes without endangering banking sector stability, it said.
The IMF urged authorities to pursue structural reforms needed to accelerate income convergence, saying the impact of public investment remains low and the quality of health and education spending is below regional standards.
Kosovo, the nation of 1.8 million people, reported 15,971 cases of coronavirus so far, and 638 deaths.