The Commission and Kosovo Government representatives discussed a number of policy areas, including Kosovo's macro-economic development, fiscal and financial policies, structural reforms and private sector development, the statistical system and financial control. Initially, the Commission stressed the importance of implementing the adopted Joint Conclusions on the 2019-2021 Economic Reform Programmes.
In the area of economic and fiscal policies, the key economic developments were discussed including GDP growth, inflation, the labour market and the external competitiveness. While Kosovo's economic growth held-up well in 2018, 3.9% increase in GDP, the projected acceleration above the historical average deserves a closer look. The EC called to consider more realistic GDP outlook, which would be in line with the consensus forecast. In the context of growing economy, the Commission asked for clarifications about declining participation in the labour market. Kosovo's side informed that the inflation expectations will be revised upwards for 2019.
The Government presented the outlook for fiscal policies, reflecting the projections of the Medium Term Expenditure Framework (MTEF). The EU side underlined the importance of adhering to the ERP policy guidance and expressed concerns with respect to rising current spending and under-execution of capital budget. The EU side underlined its support to the reform of the public administration in Kosovo, however, stressed the importance of containing the cost of the reform in order to preserve fiscal sustainability in 2020 budget. In this context, the Commission recalled the need of preserving macro-fiscal stability by respecting the spending and deficit limits prescribed by fiscal rules. As regards the financial sector, discussions took place on the latest developments in the banking and insurance sectors.
The authorities presented the state of play of key structural reforms in sectors such as health, public administration, pension reform and privatisation. The EU side invited the authorities to refrain from adoption of any new pension and social initiatives pending the review of all existing social schemes and assessing their long-term fiscal implications. Furthermore, the EU side asked to be continusly informed on the developments in the key public sector reforms such as health and pensions and their fiscal implications.
The Commission took note of the progress made on other structural reforms, but stressed the need to address pressing issues, such as situation in labour market, widespread informality, energy supply are the areas where further reform efforts are needed. The EU side underlined that fostering private sector development, strengthening productivity and creating jobs should guide Kosovo’s reform agenda.
In the area of statistics, the Commission pointed to the need to implement the adopted amendments to the Law on Statistics. The resource situation for production of Official Statistics in Kosovo was discussed also in view of data requirements and their timeliness. The discussion also focused on the requirement to strengthen national accounts, and for this purpose also business statistics. Efficient collection and publication of statistics is a priority for evidence-based policy. The Commission underlined the need to pursue the necessary preparations for Census 2021, especially related to methodology and allocating necessary funding.
In the area of Financial Control, the recent developments in the Public Internal Financial Control were discussed. It was pointed out that Attention should be paid to ensuring comprehensive Public Internal Financial Control and Public Finance Management and Public Administration Reforms. Kosovo needs to develop a comprehensive Policy Paper on Public Internal Financial Control with a particular focus on the application of the principle of managerial accountability. The Commission underlined the need of strengthening the Parliament and Government oversight and monitoring function to ensure implementation of the external audit recommendations.
The meeting was co-chaired by the Ministry for European Integration and the European Commission Directorates-General for Economic and Financial Affairs, and the one on Neighbourhood and Enlargement Negotiations.