| Summary: | This 2022 Article IV Consultation highlights that the increase in energy and food prices after Russia’s war in Ukraine is weighing on private demand, activity, and inflation in the Republic of Kosovo. Growth is projected to moderately pick up to 3.5 percent in 2023, and inflation to decline to 5 percent, though these forecasts crucially depend on the assumption that international commodity prices will ease. Uncertainty remains high, with risks to the downside for growth and to the upside for inflation. The budget for 2023 appropriately envisages a return to the fiscal rule deficit ceiling. While the financial sector has remained resilient through the pandemic and the war in Ukraine, the shifting macroeconomic outlook calls for further strengthening credit risk monitoring, accounting for bank-by-bank idiosyncratic risks and capacities and improving the surveillance of the housing market. Addressing infrastructure and governance gaps is essential to support new growth engines. Revitalizing the reform program requires strengthening coordination among and across all levels of government. Boosting green energy will increase energy security and decrease greenhouse gas emissions. Early withdrawals from the pension system should be avoided
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