Country Reports
2022
July 8, 2022
Slovak Republic: Selected Issues
Description: This Selected Issues paper on Slovak Republic focuses on supply bottlenecks in 2021. With a shift in global consumer spending toward goods, shortages of inputs and labor and logistical bottlenecks, supply bottlenecks were a prominent feature of the 2021 economic landscape, slowing the pace of the recovery and pushing up inflation. Using an empirical approach to quantify the impact of supply and demand shocks, this selected issue paper finds that supply shocks had a particularly pronounced effect in Slovakia, exerting a sizable drag on industrial production, and contributing significantly to producer price inflation. We find that in 2021H2 in Slovakia, manufacturing output would have been 15 percent higher and 60 percent of the increase in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks. The greater vulnerability of the Slovak economy to supply bottlenecks is consistent with its sizable auto sector, specialization in downstream activities, and high degree of integration into global value chains. The findings suggest that Slovakia remains highly exposed to supply shocks if the disruptions experienced in 2021 were to persist in 2022 or be amplified by the war in Ukraine.
July 8, 2022
Dominican Republic: 2022 Article IV Consultation-Press Release; and Staff Report
Description: This 2022 Article IV Consultation discusses that the Dominican Republic’s dynamic economy continued to show remarkable resilience to shocks, rebounding strongly from the impact of the pandemic. The recovery has been broad based; gross domestic product was about 5 percent above pre-pandemic levels as of end-2021. The country maintained sound market access and benefitted from IMF support through the Rapid Financing Instrument. A frontloaded fiscal consolidation tailored policies to the evolving impact of the pandemic—phasing out support as employment recovered and devoting efforts to the reopening—and allowed a significant reduction in public debt. Discussions focused on the ongoing normalization of monetary policy, the fiscal response to global shocks amid efforts to secure fiscal sustainability, and the exit strategy from financial sector pandemic support. These reforms—supported by IMF capacity development—can foster growth and signal strong commitment to sustainable policies. Sound sequencing in the reform agenda can build consensus for revenue mobilization going forward.
July 8, 2022
Gabon: First and Second Reviews of the Extended Arrangement under the Extended Fund Facility, Requests for Waivers for Nonobservance of Performance Criteria, Establishment of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director
Description: This paper presents Gabon’s First and Second Reviews of the Extended Arrangement under the Extended Fund Facility, Requests for Waivers for Nonobservance of Performance Criteria, Establishment of Performance Criteria, and Financing Assurances Review. Program implementation has been mixed amid pandemic-related disruptions. A nascent economic recovery is underway, and the medium-term outlook is broadly positive amidst higher oil prices, but it remains subject to considerable uncertainty. The war in Ukraine will affect the economy through higher food and fuel prices. Expediting the design of well-targeted social safety nets will also be critical to providing adequate support to vulnerable households and strengthening social protection. Addressing structural reforms, including governance and corruption weaknesses is paramount to achieve strong and inclusive growth. Enhancing the banking sector and implementing an effective financial inclusion strategy, improving the business environment, and strengthening the anti-corruption framework will help address bottlenecks in the economy and promote private investment.
July 7, 2022
Ireland: 2022 Article IV Consultation-Press Release; Staff Report; and Informational Annex
Description: This 2022 Article IV Consultation with Ireland highlights that the economy has rebounded strongly from the pandemic. The financial sector weathered the pandemic crisis well thanks to high capital buffers and effective policy support. The impact of the pandemic on borrowers’ financial position has started to dissipate, but uncertainty remains. While the outlook is strong, uncertainty is substantial due to the indirect impacts of the war in Ukraine. Several pre-pandemic challenges remain: housing shortages, infrastructure, social and green investment gaps, and the need to strengthen multinational enterprises’ inward linkages to broaden growth and make it more inclusive. There is also a need to address the Global Financial Crisis legacy effects on the financial system and tackle the factors contributing to high lending interest rates. The fiscal stance is broadly appropriate. However, in the short term, two-way fiscal flexibility is needed to strike a balance between supporting the economy and containing inflation. In case growth disappoints, automatic stabilizers should be allowed to fully operate and fiscal space deployed, if necessary, through high-quality measures. Structural reforms should aim to remove bottlenecks, increase productivity, and reduce inequities. In particular, housing supply policies should be further strengthened, with a focus on boosting productivity in the construction sector and improving the planning and permit processes.
July 7, 2022
Ireland: Selected Issues
Description: This Selected Issues paper on Ireland focuses on ensuring an inclusive and growth-enhancing fiscal policy mix. It assesses the scope for improving the tax system toward a more growth-friendly structure, and for achieving efficiency gains in public expenditure. It also discusses upcoming impediments to long term fiscal sustainability and proposes options to achieve a more growth friendly and equity-enhancing revenue and expenditure policy mix. Under the 2021 National Development Plan, the government plans to significantly expand investment to historically high levels over the medium term. Good progress has been achieved in raising public spending efficiency but there is scope for further improvement. The stylized facts highlight the need for reforms to broaden the tax base and find new and stable sources of revenues as well as improving public expenditure efficiency. Public spending should focus on growth-friendly spending and reducing efficiency gaps. Decisive reforms are needed to ensure the future sustainability of the pension system and safeguard long term fiscal sustainability.
July 7, 2022
Ireland: Financial System Stability Assessment
Description: This Financial System Stability Assessment paper highlights that the Irish financial system has grown rapidly and in complexity, especially after Brexit, and Ireland has become a European base for large financial groups. Risks to financial stability emanate from a much larger and more complex financial system, persistent legacy issues, as well as emergent ones from non-bank lending, Fintech, and climate change. Stress tests confirmed banks’ resilience to severe macrofinancial shocks, with some caveats. While broadly adequate, supervisory resources and capacity need to keep pace with a growing and more complex sector with significant cross-border linkages. Efforts are needed to further strengthen supervision of banks’ credit risk and develop capacity and skills on new areas such as climate, non-bank lending, and Fintech. Insurance oversight should prioritize intra-group complexities. Resolution and crisis management can be enhanced through greater planning and collaboration between the Central Bank and the Department of Finance to bolster the ability to deal effectively with institution failures and systemic crises.
July 5, 2022
Republic of Kazakhstan: Technical Assistance Report-Risk-Based Supervision Recovery Plans and Interest Rate Risk
Description: This paper presents Republic of Kazakhstan’s Technical Assistance (TA) report on risk-based supervision recovery plans and interest rate risk. The mission provided recommendations and training to the Agency on the assessment of banks’ recovery plans and interest rate risk in the banking book (IRRBB). The Agency continues to make progress on aligning its prudential regulatory and supervisory frameworks with international standards. The two missions in September 2020 and November 2020 focused on strengthening the Agency’s institutional set up, and on the implementation of certain elements of the Pillar 2 requirements of the Basel Framework. This mission recommended the Agency develop comprehensive regulatory requirements for banks’ recovery plans. The new framework should provide standards that comply with international standards and reflect proportional application to Kazakhstan banks’ systemic risk profile. A short-term follow-up TA can be considered to ensure consistency of the revised regulations with international standards. The mission included six training sessions for supervisors on IRRBB and recovery plans.
July 5, 2022
Democratic Republic of the Congo: Staff Report for the 2022 Article IV Consultation, Second Review Under the Extended Credit Facility Arrangement, Request for Modifications of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report, and Statement by the Executive Director for the Democratic Republic of the Congo
Description: This paper highlights Democratic Republic of the Congo (DRC) the 2022 Article IV Consultation, Second Review under the Extended Credit Facility (ECF) Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review. The DRC’s macroeconomic environment has improved since the last Article IV consultation in 2019. The authorities have adopted prudent macroeconomic policies, most visibly by halting central bank financing to the government. Strengthening the monetary and exchange rate policy frameworks will support price stability and external sustainability. Continued efforts to accumulate reserves buffers while enhancing the role of the exchange rate as a shock absorber are paramount to build resilience to external shocks. Advancing structural reforms and strengthening policy frameworks, including in natural wealth management, are key to promoting higher and sustainable inclusive growth, as the global energy transition provides an opportunity for development. Scaling up structural reforms remains critical to promote inclusive growth, including those enhancing governance and enhancing the business climate—both key to support investment, private sector development, economic diversification, and competitiveness.
July 5, 2022
Democratic Republic of the Congo: Selected Issues
Description: This Selected Issues paper on the Democratic Republic of the Congo (DRC) focuses on building resilience and exploring opportunities from climate change. Addressing the challenges associated with climate change in the DRC requires a good understanding of its exposure to climate vulnerabilities as well as the bottlenecks in scaling up climate policies to achieve its nationally determined contribution. At the same time, the global efforts to develop low-carbon technology and conserve carbon sinks put the DRC in a good position with substantial long-term benefit for the country. Hence, the country would benefit from focused efforts in strengthening forest and mining managements, while building resilience to climate change. Current logging policies have failed to prevent deforestation in the DRC. The DRC presents itself as a solution country for the diffusion of carbon-reduction technology. The advent of metals critical for the energy transition could strengthen the impact of global commodity cycles on external sector.
July 5, 2022
Vietnam: 2022 Article IV Consultation-Press Release; Staff Report, and Statement by the Executive Director for Vietnam
Description: This 2022 Article IV Consultation discusses that Vietnam entered the pandemic with robust economic growth and sound fundamentals. Prudent policies resulted in a prolonged period of high growth, price stability, and low public debt ratios. Strong foreign direct investments and trade flows boosted external buffers while banks entered the pandemic in a relatively strong position. The government’s new support package presents an opportunity to entrench the recovery, mitigate the scars of the pandemic, and deliver sustained and inclusive growth. In view of the strong but uneven recovery and heightened uncertainty, policymaking should be agile, and the size and composition of policy support calibrated to the pace of the recovery and downside risks. The report suggests that monetary policy should be increasingly focused on rising inflationary risks, while allowing for greater exchange rate flexibility. Reforms to modernize the monetary policy framework should continue. In order to bolster long-term growth and convergence, the authorities should decisively tackle pervasive economic dualism and boost productivity, focusing on improving the business environment, strengthening governance, reducing corruption, alleviating labor skill mismatches, and improving labor force quality.