Country Reports
2024
June 6, 2024
Spain: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The Article IV Consultation discusses that with a growth rate of 2.5 percent in 2023 and continued solid activity momentum, the Spanish economy has demonstrated remarkable resilience to elevated global uncertainty and tighter financial conditions. Robust services export performance and public consumption have been the main drivers of recent growth. Spain’s banking system has shown resilience. Strong economic and labor market performance and deleveraging have helped the private sector cushion the impact from rising interest rates, although pockets of vulnerability remain. Growth is projected to reach 2.4 percent in 2024 and 2.1 percent in 2025, driven primarily by stronger domestic demand growth. Private consumption is expected to strengthen as the household saving rate normalizes gradually and real wage income continues to increase steadily. Uncertainty surrounding the outlook has become more balanced, but risks remain tilted to the downside for growth and to the upside for inflation.
June 6, 2024
Spain: Financial System Stability Assessment
Description: This paper presents report on Financial Sector Assessment Program (FSAP) in Spain. The bank-dominated Spanish financial system has shown resilience against shocks and household and nonfinancial corporate sectors have continued to de-lever their balance sheets. Nonbank financial intermediation comprises a smaller share of the financial system. Systemic risk analyses cover the banking, household, nonfinancial corporates, and real-estate sectors. The main risks to financial stability are of an abrupt, significant slowdown in growth alongside a material, further tightening in financial conditions, including higher interest rates and risk premia and downward pressure on real estate valuations. Banks’ ability to cope with asset quality pressures without resorting to deleveraging is inhibited by incumbent solvency buffers that are lower than European peers on a risk-weighted basis. In the near term, deploying policies that ensure that significant banks retain a greater share of profits to further raise capital buffers and be better positioned against downside risks is desirable. Macroprudential and supervisory authorities need to be well resourced to address emerging risks and challenges and close previously identified gaps in the policy framework.
June 6, 2024
Spain: Selected Issues
Description: This Selected Issues paper focuses on dissecting Spain’s soaring tax revenues and their implications for projections. This paper combines an econometric approach based on historical time series with a more detailed analysis of relevant developments for each tax over the post-Coronavirus disease period. The analysis finds that several factors contributed to the 2020–2023 revenue boom, including large employment gains and the so-called fiscal drag, among others. The revenue boom closed almost half of Spain’s revenues-to-gross domestic product gap relative to peer countries—from 7.1 percentage points in 2019 to 4 in 2023. Given the need for sizeable and sustained fiscal consolidation to rebuild fiscal buffers and set debt on a downward trajectory, continued efforts to boost revenues will be needed. In particular, reforms of the tax system in areas not considered in this paper, such as environmental taxation, could raise additional resources while addressing externalities and supporting the green transition.
June 5, 2024
Trinidad and Tobago: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Trinidad and Tobago
Description: The 2024 Article IV Consultation highlights that Trinidad and Tobago is undergoing a gradual and sustained economic recovery. Real Gross Domestic Product (GDP) is estimated to have further expanded by 2.1 percent in 2023, reflecting a strong performance of the nonenergy sector. Economic growth is projected to gain momentum in 2024, supported by the nonenergy and energy sectors, and inflation is projected to remain low. The current account surplus will narrow mainly due to a decline in energy prices and energy exports and is estimated at 5.7 percent of GDP in 2024. International reserve coverage is expected to remain adequate at 7.5 months of prospective total imports. The report recommends sustaining structural reform momentum to secure a more diversified, green, resilient, and inclusive economy. It is important to foster private sector participation and promote economic diversification. Accelerating the country’s low-carbon transition agenda could help address issues raised by border carbon adjustments. Enhancing institutional capacity will improve the quality and timeliness of macroeconomic statistics.
June 5, 2024
Trinidad and Tobago: Selected Issues
Description: This Selected Issues paper aims to provide an overview of potential benefits of adopting a formal fiscal rule for Trinidad and Tobago, along with an overview of the international experience with anchoring fiscal policy in natural resource-rich countries. The authorities have also aimed to manage the swings in energy prices with its Sovereign Wealth Fund. A rules-based fiscal framework consists of several main elements that guide the management of a country's fiscal policy. A strong institutional framework for fiscal policy is key to successfully implement a rule-based fiscal framework. Trinidad and Tobago could gain from further deepening reforms underway to strengthen its fiscal framework before considering the adoption of a fiscal rule. The eventual depletion of oil and gas reserves and lower global demand for fossil fuel due to the transition to a low-carbon environment require accumulating adequate savings for future generations. A well-designed fiscal rule can help address these challenges. Moreover, the effectiveness of fiscal rules would hinge on several factors, including strong fiscal institutions, active and sound macroeconomic forecasting, and analysis, and strong and sustained political commitment to a medium-term fiscal goal.
June 4, 2024
Djibouti: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Djibouti
Description: The 2024 Article IV Consultation with Djibouti discusses that the economic outlook remains cautiously optimistic for 2024 and the medium-term albeit subject to considerable uncertainty. Regional risks, including potential trade disruptions, pose challenges in a context of tight budgetary resources. Stronger-than-expected trade from Ethiopia could support growth, and fully addressing the debt burden could improve debt sustainability and create fiscal space. Growth, estimated at 7 percent in 2023, is set to remain strong at 6.5 percent in 2024. Inflation is expected to have averaged around 1.8 percent in 2023 and projected to remain subdued. While Djibouti is well positioned to benefit from a rebound in trade, its strong dependence on Ethiopian trade exposes the country to trade shocks and the outlook in Ethiopia. In the short term, concluding debt renegotiations and clearing arrears will be essential to restoring debt sustainability. In the medium and long term, entrenching sustainability will require strengthening the revenue base, including from state-owned enterprises.
June 4, 2024
Djibouti: Selected Issues
Description: This Selected Issues paper focuses on empowering diverse futures. The economy of Djibouti grew at an unprecedented rate during the last decade, but the investment-led economic expansion did not translate into tangible labor market’s improvements. The capital-intensive nature of the country’s growth model limits job creation, while growing skill mismatches in the labor market have increased structural unemployment. While access to education has increased dramatically since the 2000s, more could be done in improving the quality of education and expanding vocational and adult learning. Moreover, stepping-up diversification would support the development of more labor-intensive sectors, further spreading the benefits from growth to all Djiboutians. The timely collection of labor market statistics remains a key constraint for supporting decision-making and job creation. The design and implementation of adequate policy frameworks to foster job creation requires complete and timely labor market data. The frequent collection of basic labor market data, such the unemployment rate, remains a priority for policy design and implementation.
June 4, 2024
Republic of Kosovo: Second Reviews Under the Stand-By Arrangement and the Arrangement Under the Resilience and Sustainability Facility and Request for Modification of Reform Measure-Press Release; Staff Report; and Statement by the Executive Director for Republic of Kosovo
Description: This Selected Issues paper presents Republic of Kosovo’s Second Reviews under the Stand-By Arrangement (SBA) and the Arrangement under the Resilience and Sustainability Facility (RSF) and Request for Modification of Reform Measure. Kosovo’s economic activity continues to expand at a robust pace, despite a challenging external environment, and inflation has declined markedly. The Kosovo authorities continue to advance their economic program and structural reform and climate agenda, supported by the SBA and the Arrangement under the RSF. Program performance under both arrangements remains strong. The authorities are advancing an ambitious green agenda. The RSF has supported efforts to strengthen the regulatory framework and increase policy space to attract private investment into green energy. The successful completion of a pilot competitive auction for solar electricity generation and a first auction for wind electricity generation are important steps in the authorities’ plan to expand renewable energy capacity. Reducing emissions and improving air quality, increasing energy efficiency, improving targeting of energy subsidies, and enhancing energy security are important goals of Kosovo’s green agenda.
May 31, 2024
Gabon: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Gabon
Description: The 2024 Article IV Consultation discusses that Gabon’s post-pandemic recovery held up well in the face of recent shocks. The economy hit a soft patch in 2023, following a series of logistics disruptions, political uncertainty, and high fuel prices for businesses, but it is set to resume its potential growth of around 3 percent this year as shocks dissipate. The transition authorities now face a historic opportunity to pivot toward a more transparent and inclusive model of governance, but overcoming decades of entrenched institutional practice will require sustained reform efforts to achieve a point of no return. Discussions focused on the main challenges facing the transition government: ensuring transparency in the management of public resources, putting the fiscal position on a sustainable footing, and raising potential growth, while making it more inclusive. Fiscal imbalances need to be urgently addressed to reduce liquidity risks and avoid unsustainable debt dynamics, as well as to support the external objectives of the currency union. Addressing transparency and governance gaps is critical for understanding the fiscal position, efficiently managing public resources, and supporting the business climate.
May 31, 2024
Ecuador: Request for an Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Ecuador
Description: This paper highlights Ecuador’s Request for an Extended Arrangement under the Extended Fund Facility (EFF). The authorities implemented swift and bold measures in early 2024 to address the fiscal and liquidity challenges and requested a 48-month EFF arrangement of SDR 3 billion to support their policy plans and advance an ambitious structural reform agenda. IMF estimates that IMF resources are needed to close a financing gap of about US$4 billion during the program period, after factoring in an ambitious and large fiscal plan, financial support from international financial institutions and official bilateral partners, and renewed access to international capital markets. The baseline scenario under the program is, however, subject to substantive risks, stemming from both external and domestic factors. IMF assesses that the policy program provides a reasonably strong prospect of success, amid broad support to the main objectives of the EFF arrangement, and strong commitment and capacity by the authorities to take measures to ensure its successful implementation.