Climate Change

This document presents Serbia’s Second Review under the Policy Coordination Instrument (PCI), and Request for Modification of Quantitative Targets. Serbia’s strong track record of prudent macroeconomic management has built buffers that are helping the authorities navigate a challenging environment marked by ongoing protests, energy security risks following U.S. sanctions on the macro-critical oil company NIS, and global trade tensions. The PCI provides an important anchor for policy credibility and private sector confidence by ensuring fiscal prudence, strengthening energy sector resilience, and supporting authorities’ commitment to transparent, accountable, and rules-based government. Under the PCI, fiscal deficits continue to be kept within the 3.0 percent of GDP ceiling. Monetary policy remains appropriately restrictive, including looking through temporary price fluctuations from recent price and margin controls. Fiscal transparency and accountability are being strengthened through continued reforms in public financial and investment management while energy sector reforms to enhance energy security continue.

São Tomé and Príncipe (STP) is confronting a challenging macroeconomic environment marked by unfavorable demographic trends, an energy crisis, and delays in the energy transition. As a result, GDP growth forecasts have been revised downward, and an additional balance of payments gap is projected. Against this backdrop, the authorities are requesting a 12-month extension of the 40-month ECF arrangement approved in December 2024, along with an augmentation of SDR 4.44 million (30 percent of quota), bringing total access to 155 percent of quota, combined with a more gradual and less front-loaded path for fiscal adjustment, on the heels of the large cumulative fiscal consolidation since 2022.

2025 Selected Issues

Togo aspires to attain middle-income status by 2030, anchored in social inclusion, job creation, and modernization. However, the country faces important development challenges. This includes dealing with the impacts of climate change such as rising temperatures, more frequent extreme hot days, and increasingly erratic rainfall patterns, with intensified single-day precipitation events. This is especially important given the country’s strong dependence on agriculture. Competing development needs require a more integrated approach to land policy, planning, water management, energy access, and forest protection. The country also needs substantial investments in its electricity, water, and waste sectors but private investment is lacking. The mission reviewed the current fiscal policies supporting climate action and provided recommendations to support the long-term climate resilience in Togo, while aligning with its overall development objectives.

Economic momentum remains strong despite continued global uncertainty and inflation is largely receding. Fiscal performance during the first half of 2025 exceeded expectations and strong tax revenue collection is expected to continue through the end of the year. The foreign exchange market continues to function smoothly, and foreign reserves remain at a comfortable level. Structural reforms are advancing at a higher pace. The economic outlook is subject to large downside risks owing to global geopolitical tensions and uncertainty. Exposure to climate risks is significant, primarily through The Gambia’s low elevation and reliance on rain-fed agriculture.

Albania stands at a pivotal juncture, with one of the highest growth rates in Europe, low inflation, declining public debt, and strong foreign reserves. Building on this foundation, the government is advancing bold reforms to secure EU membership by 2030. The near-term outlook is positive but the road to accession is complicated by structural challenges. Significant reform gaps with the EU persist amid stagnant productivity, while a more volatile global environment—coupled with domestic pressures on wages and asset prices—pose risks to the sustainability of tourism-led growth.