November 10, 2017 / 3:30 PM / a year ago

IMF to revise up 2017 Kosovo growth forecast

PRISTINA (Reuters) - The International Monetary Fund will revise up its 2017 growth forecast for Kosovo, but still considers its economic model unsustainable, IMF resident representative Ruud Vermeulen told Reuters on Friday.

Kosovo, one of the poorest countries in Europe, has seen average annual economic growth of 3.4 percent over the past decade, but widespread corruption, organised crime and political tensions have deterred foreign investors.

Unemployment remains at around 30 percent, and youth unemployment around 50 percent.

“We are right now in the process of revising our projections,” Vermeulen told Reuters in an interview.

“We predicted to have 3.5 pct growth for this year and next year, but the fact is that the official statistics show that the economy is already growing 4.3 percent over the first half of 2017.”

However, he said the economy of Kosovo, which has a population of around 1.8 million, was still in need of structural reform:

“Growth is high, but relies on an unsustainable model, driven by consumption and investments in non-tradable sectors financed primarily by remittances, with high unemployment and low activity as a result.”

Remittances from some 800,000 Kosovars who live abroad account for about 13 percent of national output.

The IMF in July failed to complete a final review of a 184 million euro loan deal with Kosovo, freezing remaining funds worth some 15 million euros.

However, Vermeulen said the economy was “in a much better shape” than in 2015, when the last standby deal was reached, and the IMF was ready to negotiate another programme with the government that was elected this year.

Kosovo’s public debt is the lowest in the region at around 17 percent of GDP.

“We have not received a request for another programme but we stand ready for a new programme,” Vermeulen said. “We are here to support Kosovo in any way we can, within our mandate.”

Reporting by Fatos Bytyci; Editing by Ivana Sekularac and Kevin Liffey

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