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kosovo: kosovo Economy Profile 2012

2012/03/14

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Kosovo Economy Profile 2012

“Kosovo’s economic performance has strengthened considerably over the past decade, but large imbalances persist. The external imbalances reflect infrastructure bottlenecks, especially in the transport system and energy sector, that continue to stifle productivity and competitiveness. The government’s necessary efforts to improve the public infrastructure, combined with the need to address pressing social issues, led to a significant deterioration of its public finances. Moreover, the decision to build a highway of national importance is creating additional expenditure pressures.

“For these reasons, the authorities are now taking strong action to tighten the budget deficit, improve public financial management, and enhance tax administration in order to restore fiscal sustainability. These reforms will be accompanied by measures to improve the efficiency of the economy through the privatization of the Post and Telecommunications of Kosovo and to strengthen performance of the energy sector.

“The fiscal measures in the economic program agreed with the mission aim to limit the overall budget deficit in 2010 to 3.4 percent of GDP. In order to meet this target, the government intends to take revenue measures and restrain current spending, given the large commitments for capital expenditures. Expenditure restraint will need to be maintained throughout 2011. Therefore, the government has decided to amend the Law on Public Financial Management and Accountability in order to ensure that future mid-year budget reviews will be budget neutral and will no longer lead to a widening of the fiscal deficit.