Republic of Kosovo: 2024 Article IV Consultation and Third Reviews Under the Stand-By Arrangement and the Arrangement Under the Resilience and Sustainability Facility-Press Release; and Staff Report

2024 ARTICLE IV CONSULTATION AND THIRD REVIEWSUNDER THE STAND-BYARRANGEMENTAND THEARRANGEMENT UNDER THERESILIENCE ANDSUSTAINABILITY FACILITY—PRESS RELEASE;ANDSTAFF REPORT In the context of the2024 Article IV Consultation and Third Reviews Under the Stand-ByArrangementand theArrangement Under theResilience and Sustainability Facility, thefollowing documents have been released and are included in this package: •APress Release. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onlapse-of-time basisfollowing discussions that ended onNovember11, 2024, with the officials oftheRepublic ofKosovoon economicdevelopments and policies.Based on information available at the time of thesediscussions, the staff report was completed onDecember 4, 2024. •AnInformational Annexprepared by the IMFstaff. The documents listed below have been or will be separately released. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies ofthis report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024 Article IV Consultationand the Third Reviews Under the Stand-by (SBA) and theResilience and Sustainability Facility (RSF) Arrangements withKosovo FOR IMMEDIATE RELEASE •The IMF Executive Board concluded the 2024 Article IV Consultation and the ThirdReviews under the Stand-By (SBA) and the Resilience and Sustainability Facility (RSF)arrangements with Kosovo. This provides Kosovo access to an additional SDR 13.35million (€16.7 million) under the SBA and SDR 15.5 million (€19.3 million) under the RSF. •Kosovo’s economic performance has been strong, with growth accelerating in 2024 andinflation falling sharply. The near-term outlook is favorable despite some downside risks. •The authorities continue to show strong performance under both programs. Allquantitative targets and structural conditions for the completion of the Third Review underthe SBA were met. Most RSF Reform Measures (RMs) have been completed. Washington, DC – December 23, 2024:The Executive Board of the International MonetaryFund (IMF) concluded the 2024 Article IV Consultation1and the Third Reviews under theStand-By (SBA) and the Resilience and Sustainability Facility (RSF) arrangements withKosovo on a lapse-of-time basis.2The completion of the Reviews allows the authorities todraw SDR 13.35 million (€16.7 million) under the SBA and SDR 15.5 million (€19.3 million)under the RSF. This would bring total disbursements under the RSF to SDR 54.21 million(€67.7 million). The authorities continue to treat the SBA resources precautionary. Kosovo's economy continues its robust performance. Supported by strong privateconsumption and a positive contribution from public investments, growth in 2024 is nowexpected to reach 4¼ percent. Inflation has rapidly decelerated—owing to slowing food andtransportation services inflation—and is now expected to be at 1.8 percent on average for2024. The external current account deficit is expected to widen in 2024 fueled by higherdomestic demand, including due to strong private sector credit growth. The banking sectorremains healthy—profitable and well-capitalized with low levels of non-performing loans.Growth in 2025 and over the medium term is expected to converge towards potential—around4 percent, while inflation is forecast to remain around the ECB’s 2 percent target. Downsiderisks to the outlook stem from higher commodity prices and a slowdown in advancedEuropean economies. On the other hand, faster integration with the EU could provideimportant financing and boost reform momentum. Performance under both arrangements has been strong. All end-June 2024 quantitativeperformance criteria (QPCs) and indicative targets (ITs) have been met. All ITs for end-September were also met. A structural benchmark (SB) for end-June and a prior action on the submission of the 2025budget in line with program commitments have also been met. Most reform measures agreedunder the RSF have been implemented. Executive Board Assessment Activity has accelerated and inflation has receded rapidly, but structural vulnerabilities remain.Growth increased in 2024, supported by strong private consumption and rapidly declininginflation that boosted real incomes. However, the external balance has deteriorated with awidening trade deficit and lower remittances. Growth is expected to reach 4¼ percent in 2024and stabilize around 4 percent in the medium term, while inflation will converge to the ECB’s2 percent target. Given the large investment needed to further accelerate growth to convergetowards EU income levels, Kosovo should increase