Country Reports
2018
January 22, 2018
Arab Republic of Egypt: 2017 Article IV Consultation, Second Review Under the Extended Arrangement Under the Extended Fund Facility, and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for the Arab Republic of Egypt
Description: This 2017 Article IV Consultation highlights that Egypt’s reform program, supported by the Extended Fund Facility arrangement, has played a critical role in stabilizing the economy. By the end of 2015/16, a long-standing and ultimately unsustainable policy mix had resulted in low growth and investment, elevated general government debt, an overvalued exchange rate, a widening current account deficit, declining gross international reserves and severe shortages of foreign exchange. Egypt’s economic outlook is favorable, provided prudent macroeconomic policies are maintained and the scope of growth-enhancing reforms is broadened. To sustain economic reform momentum, in the medium term, policy priorities should aim to raise potential output and promote inclusive growth to create jobs for Egypt’s young and growing population.
January 22, 2018
Arab Republic of Egypt: Selected Issues
Description: This paper analyzes that past growth was characterized by a suboptimal allocation of the factors of production and a lack of dynamism in the private sector. By identifying the main constraints to private sector-led growth and higher employment generation, it suggests policies to further shift Egypt’s economic model toward increased private sector participation and integration into global value chains. To this end, reforms should aim at removing the distortions to the optimal allocation of resources in the economy and equip the labor force with the skills needed to benefit fully from future job opportunities. These reforms would also help better integrate women and youth into the job market. The authorities have embarked on a reform program to address these challenges and important steps have already been taken. Improved macrostability and a strong political commitment to reforms present an opportunity to further structural reforms that intensify private sector-led growth and job creation and strengthen trade integration.
January 22, 2018
People's Republic of China-Hong Kong Special Administrative Region: 2017 Article IV Consultation-Press Release; Staff Report; Statement by the Executive Director for People’s Republic of China––Hong Kong Special Administrative Region
Description: This 2017 Article IV Consultation highlights that economic activity in Hong Kong Special Administrative Region has gained momentum since the second half of 2016 amid robust domestic demand and recovering external demand. Growth is projected to have risen by 3.7 percent in 2017, up from 2 percent in 2016. The strong growth momentum is expected to continue in the near term with annual growth of 2.8 percent in 2018. Consumption is projected to continue to be supported by a tight labor market and investment is expected to remain strong, with major infrastructure and housing projects in the pipeline. The economy is expected to continue to grow at about 3 percent over the medium term, close to its potential.
January 22, 2018
People’s Republic of China-Hong Kong Special Administrative Region: Selected Issues
Description: This Selected Issues paper examines medium-term fiscal prospects and policy recommendations for Hong Kong Special Administrative Region (SAR). Hong Kong SAR’s fiscal framework has worked well over the last 20 years but challenges have emerged that will strain the fiscal position in the medium to long term. Consequently, while fiscal space is ample currently, it could become gradually constrained over time. The fiscal rule should be implemented flexibly and revenue mobilization needs to be considered down the road. On the expenditure side, containment will be hard, given rapid aging and still high inequality. The challenge will be to maintain investment and boost land supply while increasing social spending to guarantee that those who need support are effectively protected.
January 19, 2018
India: Financial Sector Assessment Program-Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision
Description: This report evaluates the Observance of the Basel Core Principles for Effective Banking Supervision in India. It highlights that the supervision and regulation by the Reserve Bank of India remain strong and have improved in recent years. A key achievement is implementation of a risk-based supervisory approach that uses a complex supervisory assessment framework to guide the intensity of supervisory actions and the allocation of supervisory resources. Also, most of the Basel III framework has been implemented and cooperation arrangements, both domestically and cross-border, are now firmly in place. The system-wide asset quality review and the strengthening of prudential regulations in 2015 testify to the authorities’ commitment to transparency and a more accurate recognition of banking risks.
January 18, 2018
Rwanda: Eighth Review Under the Policy Support Instrument and Request for Extension, and Third Review Under the Standby Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Rwanda
Description: This paper discusses Rwanda’s Eighth Review Under the Policy Support Instrument (PSI) and Request for Extension, and Third Review Under the Standby Credit Facility (SCF). The existing PSI and SCF arrangement have supported Rwanda’s efforts to address external imbalances, thereby supporting continued strong growth and durable poverty reduction. The SCF arrangement added a financing component to the existing PSI-supported program, which aims to promote private-sector led growth through safeguarding macroeconomic stability, including through external sustainability, fiscal sustainability based on continued improvements in domestic resource collection, low and stable inflation, and enhancing access to credit and deepening the financial sector.
January 17, 2018
Tonga: 2017 Article IV Consultation-Press Release; and the Staff Report for Tonga
Description: This 2017 Article IV Consultation highlights that over recent years, Tonga has enjoyed robust growth and macroeconomic stability. Growth continued to be strong at 2.7 percent in FY2017 following 3.4 percent in FY2016, supported by construction, agriculture, tourism, strong remittances, and strong private credit growth. Inflation spiked in FY2017 because of a new import tax and an increase in domestic food prices. The country’s external position weakened slightly owing to construction-related imports, with reserves supported by strong remittances and donor aid. The outlook for the Tongan economy is favorable, despite external headwinds. Real GDP growth is projected at 3.4 percent in FY2018, driven by construction, agriculture, and tourism.
January 16, 2018
Republic of Croatia: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Croatia
Description: This 2017 Article IV Consultation highlights that Croatia continued its third year of positive economic growth in 2017. Growth is expected to stay at similar levels in the near future but to decelerate over the medium term. Consumer prices increased at a moderate pace and wage growth was also moderate as unemployment remained high. The external current account is expected to record another strong surplus, underpinned by robust performance of exports and tourism and lower repatriation of profits as banks absorbed losses from Agrokor. The balance of risks has improved but vulnerabilities remain sizable as public and external debt levels are still high, and the full impact of the Agrokor restructuring is yet unknown.
January 16, 2018
Republic of Croatia: Selected Issues
Description: This paper reviews the relationship between real GDP growth and domestic bank lending to the private sector in Croatia after the 2008 global financial crisis (GFC), drawing on a cross-country analysis of European countries. Croatia’s recession was substantially longer compared to peers due to both domestic and external factors. Bank credit to the private sector was found to be important for economic growth, but less than often perceived, especially during a boom–bust cycle. Using empirical analysis, this paper confirms that the deleveraging of the private sector, particularly nonfinancial companies, was slow and contributed to Croatia’s prolonged recession. When provisions of nonperforming loans (NPLs) improved and the uncertainty following the GFC receded, credit supply increased, while demand for credit hesitantly picked up with the strengthening of the recovery. The paper thus reinforces that NPLs and how they are handled as well as real growth are important determinants for credit. These findings are supported by the cross-country analysis and corroborated by other studies.
January 16, 2018
Uganda: Technical Assistance Report-Monetary and Foreign Exchange Operations, Recapitalization, and Act Revision
Description: This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding monetary and foreign exchange operations in Uganda, Bank of Uganda (BOU) recapitalization, and Bank of Uganda Act revision. The presence of sizable precautionary and involuntary reserves and excessive short-end volatility has weakened the transmission mechanism in Uganda. The key challenge remains to enhance monetary and fiscal policy coordination and to ensure that institutional and operational arrangements are robust and conducive to efficient monetary operations framework. The BOU should raise the effectiveness of the monetary and foreign exchange operations framework. To foster further market development there is need to anchor short-term interest rates by using various fine-tuning instruments to ensure improved operational efficiency and strengthen transmission of policy signals across the curve.