Country Reports
2024
August 1, 2024
Spain: Financial Sector Assessment Program-Technical Note on Regulation, Supervision, Oversight, and Crisis Management of Financial Market Infrastructures
Description: This paper presents a technical note on regulation, supervision, oversight, and crisis management of financial market infrastructures in Spain. The Comisión Nacional del Mercado de Valores (CNMV) lacks, and should be provided, full autonomy over its recruitment of staff, including in key specialist areas. The CNMV’s effective cooperation with the Banco de España (BdE) and authorities from other jurisdictions to ensure adequate supervision of Bolsas y Mercados Españoles Clearing (BMEC) and Iberclear (IC) could be further strengthened by formalizing current arrangements with the BdE. The Financial Sector Assessment Program (FSAP) identified some enhancements to the supervision of margin practices that would make it even more robust. The CNMV should ensure that its recommendations to BMEC are implemented in timely fashion and, to the extent possible, that improvements made in one segment also benefit the others. The FSAP recommends strengthening of some aspects of IC’s recovery plan.
August 1, 2024
Spain: Financial Sector Assessment Program-Technical Note on Fintech Developments and Oversight
Description: This paper presents a technical note on fintech developments and oversight as part of Financial Sector Assessment Program (FSAP) in Spain. The scope of this assessment covered fintech developments in Spain, including digitalization of the banking sector, and the supervisory oversight of fintech activity. This technical note covers the impact of fintech on regulated firms, mainly banks; the interaction between new market entrants and existing firms; the approach toward industry monitoring; and the institutional arrangements for regulation and supervision of fintech, including overall supervisory cooperation. Banks play a dominant role in Spain’s fintech landscape. A better balance between the benefits of the sandbox and its significant supervisory costs could be achieved by considering some targeted changes to its operational arrangements. The FSAP recommends granting full autonomy to the Comisión Nacional del Mercado de Valores (CNMV), which it currently lacks, over its recruitment process and ensuring alignment of resources at the Banco de España and CNMV to current and expected workloads.
July 31, 2024
Singapore: Selected Issues
Description: This Selected Issues paper estimates the exchange pass-through to inflation in Singapore with a particular focus on the role of labor market conditions. The paper first finds a strong exchange rate pass-through to inflation in Singapore, after accounting for the potential endogeneity of changes in the exchange rate. Further, it uncovers that labor market tightness dampens exchange rate pass-through and therefore could weaken monetary policy transmission. Overall, the results suggest that monetary policy should be more vigilant under a tight labor market condition. Under tight market conditions, the pass-through is found to be severely weakened and more so for the service components of the consumer price index basket. Overall, our findings suggest that the exchange rate-based monetary policy serves Singapore well, but it would need to be more vigilant when the labor market is tight. The paper then draws policy implications for taming inflation under tight labor market conditions. Further, policies designed to ease structural labor market tightness could help support monetary policy to ensure price stability in Singapore. This is consistent with a recent study on the US that suggests that dealing with the inflationary pressures originating from a tight labor market would require policy actions that bring labor demand and supply into a better balance.
July 31, 2024
Singapore: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Singapore
Description: The 2024 Article IV Consultation with Singapore highlights that following a slowdown in 2023, growth is projected to recover gradually to 2.1 percent in 2024. After reaching 6.1 percent in 2022, inflation has steadily declined to 2.7 percent in April 2024. The pace of disinflation has nonetheless been gradual, with signs of persistent price pressures including from a tight labor market. With risks to global growth now broadly balanced, downside risks to growth outlook have diminished relative to last year, but Singapore remains vulnerable to a deepening of geo-economic fragmentation. Inflation risks remain tilted to the upside. The broadly neutral fiscal stance relative to 2023 will complement the tight monetary policy stance in achieving price stability, while targeted support to vulnerable households and firms will provide temporary relief from high costs of living and business. Singapore’s financial sector remains resilient with solid capital and liquidity buffers, though vigilance against pockets of vulnerabilities is warranted, including from potential systemic risks arising from the housing market. In this context, the tight macroprudential policy stance remains appropriate.
July 31, 2024
Suriname: Sixth Review Under the Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Suriname
Description: This paper presents Suriname’s Sixth Review under the Extended Arrangement under the Extended Fund Facility. The authorities’ strong policy and efforts to stabilize the economy are yielding positive results: the economy is growing, inflation is on a steady downward trend, and investor confidence is returning. Suriname is implementing an ambitious economic reform agenda aimed at restoring fiscal and debt sustainability through fiscal consolidation and debt restructuring, protecting the vulnerable by expanding social protection, upgrading the monetary and exchange rate policy framework, addressing banking sector vulnerabilities, and advancing the anti-corruption and governance agenda. Monetary policy is supporting disinflation. The authorities’ demonstrated commitment to flexible, market-determined exchange rate is supporting international reserves accumulation. Finalization of the central bank recapitalization plan will help further strengthen its operational independence and financial autonomy. Building on the progress made thus far under the program, continued efforts are needed to entrench fiscal discipline, while protecting the poor and vulnerable, and further strengthen institutions and address governance weaknesses.
July 30, 2024
Cabo Verde: Fourth Review of the Arrangement Under the Extended Credit Facility and First Review of the Arrangement Under the Resilience and Sustainability Facility and Request of Rephasing of Availability Dates-Press Release; and Staff Report
Description: This paper discusses Carbo Verde’s Fourth Review under the Extended Credit Facility Arrangement, Request for Modifications of Performance Criteria, and First Review of the Arrangement under the Resilience and Sustainability Facility (RSF) and Request of Rephasing of Availability Dates. Macroeconomic performance in 2023 was strong, with real gross domestic product (GDP) growth of 5.1 percent, a strong primary fiscal surplus, low inflation, and a prudent level of reserves to protect the peg. The public debt-to-GDP ratio continues on a downward path, and the financial sector remains resilient. The authorities are improving the monetary and financial policy frameworks. Reforms to foster productivity and diversification underpin the authorities’ growth and climate resilience strategy. The RSF arrangement supports strong reforms in the energy-water nexus with the aim of facilitating private sector development, building the appropriate infrastructure, reducing costs, and managing the energy transition. The near-term outlook is favorable despite some downside risks. Reforms focus on climate-resilience, preserving debt sustainability, advancing strong reforms in the energy-water nexus and managing the energy transition, while targeting social spending to protect the most vulnerable from the costs of the transition. State-owned enterprises reforms are key to reducing fiscal risks, and improving inter-island connectivity is critical for competitiveness.
July 30, 2024
Euro Area Policies: 2024 Annual Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries
Description: The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
July 29, 2024
Republic of Croatia: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation with the Republic of Croatia highlights that the economy has performed strongly despite consecutive external shocks. The impressive post-pandemic growth during 2021–2022 moderated to 3.1 percent in 2023, still among the highest in the euro area. Inflation has decelerated considerably since early 2023 but still persists above the euro area average, owing to elevated food and services inflation amid a tight labor market. The authorities should immediately withdraw broad-based cost-of-living measures and implement their plan to meaningfully reduce the deficit from 2025 and return to a structural primary balance by 2027. Prudence and decisive reforms are warranted to build buffers for future shocks and long-term spending needs. The financial sector has weathered well the recent monetary tightening, and systemic risks appear manageable. Close monitoring of potential build-up of risks in the real estate sector is warranted. The multidimensional nature of labor shortages requires coordinated policies to foster labor participation, reduce skills mismatch, facilitate labor mobility, and reduce net emigration.
July 29, 2024
Burkina Faso: Selected Issues
Description: This Selected Issues paper highlights trends, impacts, and policy implications in Burkina Faso. Regional insecurity has also created increased cross-border displacement, both into and out of Burkina Faso. Burkina Faso has devised several policy responses, including in cooperation with international partners. Despite these measures, the persistent crisis of forced displacement means that the need for humanitarian assistance remains. A successful strategy for addressing the displacement crisis should be broad-based in terms of partners and approaches. Given the country's economic and financial challenges, an in-depth understanding is needed of the economic impact of forced displacement and possible solutions. In other countries, studies show positive economic outcomes to host regions of forced displacement. The inclusion of forced displaced persons in the Unified Social Register and national social nets programs would facilitate the implementation of assistance and, along with other national repositories help improve urban management and budget planning.
July 29, 2024
The Federal Democratic Republic of Ethiopia: Request of an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia
Description: This paper presents The Federal Democratic Republic of Ethiopia’s Request for an Arrangement under the Extended Credit Facility. The four-year financing package will support the authorities’ Homegrown Economic Reform Agenda to address macroeconomic imbalances, restore external debt sustainability, and lay the foundations for higher, inclusive, and private sector-led growth. The economic program envisages a comprehensive policy package to stimulate private sector activity and increase economic openness to promote higher and more inclusive growth. Supportive macroeconomic policies, including the elimination of monetary financing of government deficits, monetary policy tightening, and prudent fiscal management, will need to be sustained to keep inflation in check, ensure a successful implementation of the market-determined exchange rate, and durably address exchange rate shortages. The authorities are advancing reforms to ensure the sustainability of public finances. The authorities’ ambitious and comprehensive home-grown structural reform agenda will focus on better governance and public service delivery, competitiveness, and the business climate, to stimulate private sector-led growth and contribute to poverty reduction and raising living standards.