Country Reports
2018
September 14, 2018
Republic of Kazakhstan: Selected Issues
Description: This Selected Issues paper discusses fiscal risk assessment in Kazakhstan. Comprehensive analysis, management, and disclosure of fiscal risks help the credibility and sustainability of public finances and supports macro stability. Risk management practices are often incomplete, fragmented, and lacking quantitative analysis. This may result in an incomplete assessment of risks with adverse impacts on activity and public finances. A more comprehensive and integrated assessment of the potential effects of shocks on public finances, in the form of fiscal analysis and stress tests, helps strengthen central forecasts and understand implications for government liquidity, financing needs, and solvency. Kazakhstan has tools to mitigate some risks, but there is not a comprehensive framework to analyze and manage all fiscal risks. The analysis of fiscal risks should be presented in a single report or statement. Enhancing monitoring, management and reporting of fiscal risks would bring considerable benefits. Best practice recommends an integrated approach to fiscal risks. A deep analysis and full disclosure following a comprehensive, integrated approach with the aim of producing a detailed fiscal risk statement in line with international best practice should be a key objective for Kazakhstan.
September 14, 2018
Republic of Kazakhstan: 2018 Article IV Consultation-Press Release; and Staff Report
Description: This 2018 Article IV Consultation highlights that growth has strengthened in Kazakhstan supported by higher oil production and increased activity in trade and manufacturing. Robust exports have contributed to an improvement of the external current account. Inflation has declined and remained within the target band of the National Bank of Kazakhstan (NBK). This, along with anchoring of inflationary expectations, has allowed the NBK to undertake several interest rate cuts. Growth is expected to remain solid, although there are risks. Overall growth will likely slow as the increase of oil production moderates, but non-oil growth should increase further over the medium term, reflecting structural reforms and financial repair and deepening.
September 12, 2018
Austria: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Austria
Description: This 2018 Article IV Consultation highlights that Austria’s economic recovery is strong and broad-based. Following several years of slow growth, Austria’s output picked up markedly in 2017, and through early-2018. Output expanded by 3 percent in 2017, boosted by income tax cuts passed in 2016, higher public spending on refugees and a recovery in private investment in 2017, laying the foundation for a sustained robust expansion. Consumer and business confidence indicators have surpassed levels observed before the Global Financial Crisis and credit growth has recovered. The near-term outlook is for strong growth in 2018, at 3 percent, and a gradual return to a potential growth of about 1.75 percent over the medium-term.
September 12, 2018
Russian Federation: 2018 Article IV Consultation-Press Release; Staff Report
Description: This 2018 Article IV Consultation highlights that Russia’s economy is recovering from the 2015–2016 recession, thanks to the authorities’ effective policy response and higher oil prices. Output increased by 1.5 percent in 2017 on the back of robust domestic demand, but short of expectations. Growth is projected at 1.7 percent in 2018, supported by rising credit and disposable incomes. Headline inflation is projected to bounce back during the second half of 2018 to 3.5 percent at year end, supported by the ongoing domestic demand recovery, pass-through from the recent ruble depreciation, and the fading of temporary factors. The medium-term outlook remains muted, owing to structural bottlenecks and the lingering impact of sanctions.
September 12, 2018
Portugal: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal
Description: This 2018 Article IV Consultation highlights that following robust growth in 2017, driven by investment and exports, activity in Portugal is expected to moderate in 2018. Unemployment continues to fall on the back of sustained employment growth. Credit growth continues to lag the recovery in economic activity, as banks repair their balance sheets. However, rising capital ratios, falling rates of non-performing loans and lower impairments meant that the resilience of banks improved significantly in 2017. Further improvement is expected in 2018. Nevertheless, no significant acceleration in credit growth is expected, and the economy should continue deleveraging its external balance sheet.
September 12, 2018
Russian Federation: Selected Issues
Description: This Selected Issues paper focuses on the Russian state’s footprint in the economy. Available cross-country employment data suggests that the Russian state's is relatively large, like that of Scandinavian countries. In sectors where the state's share is high, economic concentration is larger, but concentration is large even in sectors where the state's share is low. Existing policies to protect and promote competition, including in state procurement, need to be strengthened. The IMF Staff estimates suggest that the state represented about one third of Russia’s value added (VA) in 2016, smaller than in the mainstream narrative but nonetheless large. The Russian state represents close to 40 percent of formal sector activity and 50 percent of formal sector employment. State-owned-enterprises (SOE) are present in most sectors of activity. The state’s share in VA was approximated by its share in sales for market activities, and by employment for nonmarket activities. SOEs appear to underperform relative to non-state firms in a variety of economic activities.
September 12, 2018
Portugal: Selected Issues
Description: This Selected Issues paper describes financial conditions and growth at risk in Portugal. The macro-finance literature and recent experience provide compelling evidence that financial imbalances grow in good times, creating downside risks to economic growth. The analysis highlights the importance of the price of risk, leverage and credit growth as leading indicators of risks to gross domestic product growth. The price of risk appears to provide the most powerful signal in the short term, while credit aggregates are the most significant predictor in the medium term. This finding is consistent with the volatility paradox and is line with other empirical studies. The Growth-at-Risk (GaR) model suggests contained downside risks to Portugal’s growth projections at the current juncture based on financial conditions data, but credit growth should continue to be monitored given still high leverage. The moderate risk to growth identified by the GaR model reflects the impact of low credit spreads and volatility in the financial markets, in their turn reflecting the prevailing policy mix. Still, a repricing of risks and other shocks could be magnified by the still-high leverage, and lead to less favorable growth outcomes.
September 12, 2018
Gabon: Second Review of the Extended Arrangement under the Extended Fund Facility, Request for Waivers of Nonobservance of Performance Criteria and Waivers of Applicability, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Gabon
Description: This paper discusses Gabon’s Second Review of the Extended Arrangement Under the Extended Fund Facility, Requests for Waivers of Nonobservance of Performance Criteria and Waivers of Applicability, and Financing Assurances Review. The short-term outlook for Gabon remains challenging. Although a growth rebound in 2018 is expected given good prospects for foreign direct investment and higher oil prices, low non-oil revenue collections and tight short-term liquidity conditions at the Treasury will require decisive implementation of the recently announced fiscal consolidation plan. Timely clearance of domestic arrears is needed to strengthen banks’ balance sheets and increase credit to the private sector to support growth, while clearance of external arrears is crucial to maintain Gabon’s creditworthiness and access to external financing.
September 10, 2018
Republic of the Marshall Islands: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of the Marshall Islands
Description: This 2018 Article IV Consultation highlight that growth in the Marshallese economy is estimated to have accelerated to about 3.5 percent in FY2017 (ending September 30) with a strong pick-up in fisheries and construction, with the latter owing to the resumption of infrastructure projects. Consumer prices started to rise again in mid-2017, with annual consumer price index inflation at 1.1 percent in 2017Q4. Growth is expected to remain robust at about 2.5 percent in FY2018 and about 1.5 percent over the medium term, underpinned by further increases in infrastructure spending. Inflation is expected to rise gradually to about 2 percent over the medium term.
September 10, 2018
Republic of the Marshall Islands: Selected Issues
Description: This Selected Issues paper discusses correspondent banking relationships (CBRs) pressures on the Republic of the Marshall Island (RMI). RMI’s two banks currently have access to the US financial system. The Bank of the Marshall Islands is a domestic financial institution providing banking services to a substantial portion of the population and operates five branches throughout RMI, including on the Kwajalein Atoll. RMI, through the Trust Company of the Marshall Islands, provides offshore corporate and maritime registry services. Weak implementation of the anti-money laundering and combating the financing of terrorism (AML/CFT) framework by the authorities contributes to CBR pressures in RMI. The termination of BOMI’s CBR with First Hawaiian Bank would be expected to have significant negative economic repercussions without alternative arrangements. The RMI authorities are strengthening the effectiveness of the AML/CFT framework. Additional steps should be taken to further lower the risk of losing the last US dollar CBR. Once the national risk assessment is completed, an action plan should be developed to address the identified risks.