Country Reports
2019
September 20, 2019
New Zealand: Selected Issues
Description: This Selected Issues paper discusses interactions between external risks and the New Zealand economy. The current set of external risks has the potential to be extremely damaging to New Zealand, but two factors would likely mitigate the economic impact. First, the flexible exchange rate regime is a reliable shock absorber and automatic stabilizer from the perspective of GDP, although it leads to a rebalancing between the domestic and external sectors in the economy. Second, net migration flows can reduce the negative impact of lower external demand under some circumstances, such as a growth slowdown in Australia. Fiscal policy could also offset some of the short-term costs of adjustment. Fiscal policy can provide stimulus at relatively small and manageable cost to the already-low government debt to GDP ratio. Moreover, at the current juncture, fiscal policy might need to provide the bulk of policy support against negative shocks, as monetary policy might be ineffective if has become constrained by an effective lower bound on the monetary policy interest rate.
September 18, 2019
Republic of Azerbaijan: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of Azerbaijan
Description: This 2019 Article IV Consultation with the Republic of Azerbaijan highlights that the economy is continuing to recover from a banking crisis and recession. Looking ahead, economic growth is expected to reach 2.7 percent in 2019 on strong hydrocarbon production and robust domestic demand, benefitting from new spending measures. Gradual and growth-friendly fiscal consolidation is needed to strengthen intergenerational and precautionary buffers while mitigating the adverse impact on the economy. Consolidation could rely on prioritizing and improving the efficiency of spending, rationalizing tax policy, and improving revenue administration. Reducing administrative burden for businesses, encouraging competition, and strengthening governance and transparency would reduce the cost of doing business, foster entrepreneurship, and attract foreign capital. Prioritizing investment for healthcare and education, improving its efficiency, and better targeting of social protection would help nurture human capital and improve productivity. Addressing governance weaknesses is essential to reduce vulnerabilities to corruption. More integrated policies, along with better data availability, would support decision making and credibility, and attract investment.
September 18, 2019
Bangladesh: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bangladesh
Description: This 2019 Article IV Consultation with Bangladesh highlights that economic growth in Bangladesh continues to be strong with stable inflation. Sustained growth in the ready-made garment sector with abundant low-cost labor has helped the economy to diversify away from the agricultural sector to a more manufacturing-based economy. Remittance inflows from Bangladeshis overseas continue to play an important role in promoting private consumption and external stability. While the economy still has significant potential with favorable demographics, to ensure sustainability and resilience of growth, the country needs to keep upgrading its macroeconomic policy framework and advance a range of structural measures. Bangladesh Bank should monitor inflation developments closely and stand ready to adjust its stance as needed. A gradual increase in exchange rate flexibility would help buffer the economy against external shocks and preserve the level of reserves. Continuous improvements in public financial management and frameworks to limit vulnerability to corruption will help the authorities’ goal to reach upper middle-income country status.
September 18, 2019
Bangladesh: Selected Issues
Description: This Selected Issues paper summarizes achievements of the authorities to date and describes several options to support their ongoing efforts. The economic impact of climate change on Bangladesh is likely to become more pronounced. The outlook for Bangladesh is a source of concern, with experts from the Intergovernmental Panel on Climate Change predicting that a rise in sea levels and coastal erosion could lead to a loss of 17 percent of land surface and 30 percent of food production by 2050. Responding effectively to the impact of climate change depends on designing an appropriate set of fiscal policies. These can play a key role in mobilizing both public and private sources of finance for mitigation and adaptation activities. A second priority for Bangladesh is to raise domestic revenue from its current low base, including through introduction of a carbon tax. By helping establish a predictable price for carbon emissions, carbon taxes also provide clear incentives to promote investments in emissions-saving technologies. Although opponents argue that such taxes harm economic activity and slow job creation, the revenue they generate may over time be used to reduce other distorting taxes on labor and capital.
September 17, 2019
Guyana: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana
Description: This 2019 Article IV Consultation highlights that Guyana’s economic growth strengthened in 2018 with broad-based expansion across all major sectors. The medium-term prospects are very favorable as oil production is on schedule to begin in early 2020. Economic growth is projected at 4.4 percent in 2019, extending the broad-based expansion across all major sectors. Policies to fortify the fiscal policy framework to ensure effective use of the new-found oil wealth; develop the necessary infrastructure for a suitable monetary policy framework that facilitates adjustment to oil price shocks while maintaining price stability; and reforms to enhance competitiveness, promote economic diversification, strengthen governance, and achieve inclusiveness. The passage of the Natural Resource Fund legislation is a critical step toward effective management of Guyana’s natural resource wealth. In order to ensure that fiscal discipline is maintained and spending ramps up at a pace in line with absorptive capacity, the fiscal framework should be enhanced to prevent deficits.
September 17, 2019
Mongolia: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Mongolia
Description: This 2019 Article IV Consultation with Mongolia discusses that economy growth accelerated to 8.6 percent in the first quarter of 2019, over fiscal balance turned into surplus in 2018, and gross international reserves have increased by $2 1/2 billion since 2016. The recovery stems from a stronger policy framework, significant official financing and a rebound in external demand. Notwithstanding the progress, Mongolia remains vulnerable to external shocks given its high debt levels and the economy’s dependence on mineral exports. Structural reforms progressed in several key areas: the budget process is more resilient to political pressure and quasi-fiscal activities were curtailed. In order to achieve sustainable and inclusive growth, it is necessary to advance the current reform efforts by strengthening the rule-based fiscal policy framework, ensuring financial sector soundness and improving governance. Risks are tilted toward the downside in the near term. Shocks to mineral demand can lead to sharp fall in exports, weakening growth outlook and fiscal accounts. A slowdown in growth could trigger financial instability given still inadequate capital buffers at some banks and overindebted households.
September 17, 2019
Mongolia: Selected Issues
Description: This Selected Issues paper aims to take stock of key challenges and propose recommendations on how to address them. Mongolia has taken important steps to address these challenges, but more should be done to tackle remaining gaps and ensure effective enforcement. Improving governance is a crucial step for Mongolia to achieve sustainable and inclusive growth. In order to substantially reduce corruption, a stronger anti-corruption framework should be accompanied by governance reforms across a range of state functions. On rule of law, the Worldwide Governance Indicators (WGI) place Mongolia above peers in Asia but below regional averages, indicating room for improvement. Although Mongolia has developed a legal framework since the transition to a market economy, observers point out that there are often loopholes and unintended consequences. Weak revenue administration can undermine fiscal sustainability while uneven enforcement of tax rules can damage the investment climate. State-owned enterprises would benefit from better governance, particularly given their central role in output and potential for creating fiscal liabilities.
September 13, 2019
Namibia: 2019 Article IV Consultation-Press Release and Staff Report
Description: This 2019 Article IV Consultation with Namibia discusses that with the temporary stimuli now ended, the economy is rebalancing while the government is implementing a significant fiscal consolidation. A likely slow recovery, the need for further fiscal adjustment to bring public debt to a sustainable path, persistent inequalities and structural impediments to growth, point to a challenging outlook. Immediate measures are needed to deliver the authorities’ fiscal adjustment plans and bring public debt to a sustainable path. Policies should combine spending reductions and revenue increases that support long-term growth. Better targeting of cash transfers would protect the poor. Structural reforms are urgently needed to strengthen productivity and external competitiveness and boost long-term growth. Reforms should streamline business regulations, contain public sector wage dynamics, and reduce costs of key production inputs. Over time, it is important to remove non-tariff barriers to exports, foster the adoption of new technologies, and address shortages of skilled workers.
September 12, 2019
Uganda: Technical Assistance Report-Strengthening the Performance of Public Investment Management–Next Phase
Description: This Technical Assistance report on the Uganda focuses on strengthening the performance of public investment management – next phase. Significant progress has been achieved since 2015 in strengthening public investment management, with the reforms showing first results. New procedures need to be designed to refresh project information and assess the status of ongoing projects. With better information, a robust prioritization process of ongoing and new projects within the medium-term envelope should be implemented. Discussions with Ministries, Departments and Agencies, and the mission’s analysis of the upgraded project data identified inconsistencies between projects’ planned use of resources, approved project budgets and the medium-term resource envelope. Reliable and updated information on project forward estimates and commitments like signed contracts and certificates of work is fundamental for ensuring sufficient and timely funding of projects. Recent strengthening of Public Investment Management processes has been accomplished with limited changes to the legal framework.
September 10, 2019
Montenegro: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Montenegro
Description: This 2019 Article IV Consultation with Montenegro highlights that while the implementation of large publicly financed infrastructure projects has added economic growth, the accompanying use of fiscal resources has contributed to a large increase in government debt including guarantees, which reached 79 percent of gross domestic product in 2018. Despite the recent intervention in two non-systemic domestic banks, the overall banking sector exhibits improving asset quality, strong credit growth, high liquidity, and is well capitalized. Efforts to improve banking and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervision are paramount. The emphasis should be a shift to risk-based tools for supervision in both off-site and on-site functions, and the establishment of a stronger supervisory structure within the central bank. The main priorities are reduction of the labor tax wedge and implementation of the new labor law that aims to increase labor market flexibility. Future decisions on the minimum wage should consider a broad set of indicators and require careful analyses of the impact of past increases.