Page 121 - SE Outlook Regions 2022

2022, the budget needs to include an allocation for emergency
expenditures should the virus strike back. Moreover, the fully
replenished fiscal buffers provide an opportunity to initiate the process
to obtain a rating for Kosovo’s public debt securities, which in time
could expand the size and liquidity of the public debt market. In turn,
making the budget more pro-growth requires improving the
composition, effectiveness, and efficiency of spending.

While security, defence and road infrastructure comprise a large portion
of the investment budget, downside risks call for devoting targeted
resources to increase the share of households and schools with access
to computers and the expansion of hospital infrastructure, the IMF
warned. Sustaining and consolidating recent gains in formalisation of
economic activity requires faster and more effective commercial courts
and continuing efforts to improve tax policy and administration as well
as increasing electronic payments.

According to the World Bank, higher fiscal deficits are likely due to a
possible acceleration of public expenditure growth in the medium term.
Public revenue and public expenditure are projected to increase by an
average of 4% and 7.6% per year in the medium term, fuelling an
increase in the level of the fiscal deficit compared to 2021. Public
revenue growth will decelerate, mainly because of the absence of
one-off contributors, such as dividend income, and because of a
slowdown in import growth and inflation compared to 2021. Expenditure
growth will be fuelled by an acceleration in public investment spending,
but also increased current expenditure driven by the implementation of
the Economic Revival Plan. As a result, fiscal deficit levels are expected
to increase from 2021 to an average of 2% of GDP over the medium
term. With limited availability of privatisation proceeds over the medium
term, the deficit is projected to be financed primarily through new
domestic debt and concessional external debt. Public and publicly
guaranteed debt relative to output is projected to rise from 23.2% in
2021 to 27.8% by end-2023.

4.6 Budget and debt - Moldova

The parliament of Moldova has passed the 2022 budget,with a deficit of
MDL15bn (€750mn) or 5.9% of GDP. The gap will be the biggest in
recent years and notably higher than it was in 2020 when the economy
faced the COVID-19 shock.

Increasing the retirement age, the resumption of external financing
(from international financial institutions and the European Union) and
more generous social spending are the key topics related to the 2022

121 SE Outlook 2022 www.intellinews.com