Country Reports
2017
November 21, 2017
Honduras: Fifth and Sixth Reviews Under the Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Honduras
Description: This paper discusses Honduras’ Fifth and Sixth Reviews under the Stand-by Arrangement (SBA). All continuous performance criteria for the end of June 2017 were met. The indicative target on the National Electricity Company’s (ENEE) operating revenue-to-spending ratio was missed by a small margin owing to up-front fees paid to the loss-recovery concessionaire. On the structural front, notable reforms are the adoption of a fiscal responsibility law to anchor a sustainable medium-term fiscal position; the overhaul of the tax administration; and the reduction in the heavily overstaffed payroll of ENEE. The authorities have indicated that they will not purchase the amount available on completion of these reviews, in line with their intention to treat the SBA as precautionary.
November 21, 2017
Trinidad and Tobago: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Trinidad and Tobago
Description: This 2017 Article IV Consultation highlights a decline in the real GDP of Trinidad and Tobago of 6 percent in 2016, with a further decline of 3.25 percent projected by the IMF staff in 2017. The combined impact of weak growth and low energy sector revenues increased the overall fiscal deficit to 12.1 percent of GDP in fiscal year 2016, though it is expected to drop to 11.0 percent of GDP in fiscal year 2017. Meanwhile, the current account deteriorated by 14.5 percentage points to a deficit of 10.7 percent of GDP in 2016. The government has taken steps to adjust fiscal imbalances, through efforts to reform the energy tax regime, reduce fuel subsidies, and boost nonenergy revenues.
November 21, 2017
Trinidad and Tobago: Selected Issues
Description: This Selected Issues paper reviews the performance and reform plans for public bodies (PBs) in Trinidad and Tobago. PBs represent a source of fiscal risk to the government through the generation of financial losses, with current and capital transfers from the central government to PBs amounting to 3.5 percent of GDP in FY2015/16. Inappropriate pricing policy and weak governance are the most prevalent sources of fiscal risk. PBs must improve public service delivery and become profitable. Key policies should center on incentives for performance, stronger corporate governance, and better public oversight. Steadfast restructuring of PBs with losses must be implemented either through restructuring those that are nonviable or liquidating them to ensure efficiency and improved resource allocation.
November 20, 2017
Liberia: Seventh and Eighth Reviews Under the Extended Credit Facility Arrangement, and Request for Nonobservance of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Liberia
Description: This paper discusses Liberia’s Seventh and Eighth Reviews under the Extended Credit Facility Arrangement, and Request for Waiver of Nonobservance of Performance Criteria (PCs). Three of six structural benchmarks (SBs) for the seventh review and two of four SBs for the eighth review were met. The rest, except one, were met with a delay. Risks are concentrated in the near term. Based on the strength of the authorities’ policy commitments and corrective measures, the IMF staff supports the authorities’ request for waivers for nonobservance of PCs and supports completion of the seventh and eighth program reviews.
November 17, 2017
Zambia: Financial Sector Assessment Program-Financial System Stability Assessment
Description: This paper discusses the findings of the assessment of the financial system in Zambia. Nonperforming loans have risen and private sector credit growth has turned negative, owing to the severe pressures of 2015–16. The pressures included slower economic growth, sharply lower copper prices, electricity shortages, very tight monetary policy, and mounting fiscal arrears and severe fiscal funding pressures. Looking ahead, the financial system faces considerable risks, owing to high dependence on copper exports, rising public debt and funding pressures, and an uncertain monetary policy regime. A sharper-than-expected global slowdown may lead to copper price declines and additional pressures on government finance and the exchange rate. A lack of fiscal adjustment may worsen government payments arrears, further impacting asset quality.
November 17, 2017
Sweden: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Sweden
Description: This 2017 Article IV Consultation highlights Sweden’s continued strong economic growth. Real GDP is expected to rise by 3.1 percent in 2017, driven by both domestic demand and exports growing at a similar pace. Robust job creation of over 2 percent has lowered unemployment to 6.8 percent, or just 4.5 percent excluding full-time students. Housing price increases have moderated somewhat in 2017, to 7 percent year over year in September. Aided by large increases in new dwelling construction, signs of further market cooling have emerged in recent months. Household credit growth has also eased somewhat in 2017. Unexpectedly, strong government revenues in 2016 have carried forward into 2017, with the general government fiscal surplus projected at 1 percent of GDP.
November 17, 2017
Sweden: Selected Issues
Description: This Selected Issues paper analyzes the high household savings in Sweden. Preliminary evidence suggests that the large increase in savings after the financial crisis may reflect the rising cost of elder care. Econometric analysis appears to confirm anecdotal explanations that extended life expectancy and a preference for higher-quality residential care have contributed to higher savings. Further analysis using more granular data is needed to test alternative hypotheses for the rise in household savings. Anecdotal reports also indicate that parental assistance in young people’s home purchases could be behind the increased saving and serves as an additional bequest motive. Investigating this possibility would benefit significantly from household level data.
November 13, 2017
Mexico: 2017 Article IV Consultation-Press Release; and Staff Report
Description: This 2017 Article IV Consultation highlights the Mexican economy’s resilience in the face of a complex external environment. Output has continued to grow at a moderate pace while inflation has temporarily risen above the central bank’s target. The flexible exchange rate is playing a key role in helping the economy adjust to external shocks. The economy is projected to grow by 2.1 percent in 2017. Private consumption remains the main driver of activity, supported by manufacturing exports, while investment has remained weak amid uncertainty about Mexico’s future trade relationship with the United States. Growth is expected to slow slightly in 2018 before picking up speed as the uncertainty is resolved.
November 13, 2017
Mexico: Selected Issues and Analytical Notes
Description: This Selected Issues paper assesses the economic impact of Mexico’s structural reforms. The Mexican authorities have been implementing an ambitious structural reform agenda in a coordinated effort to lift productivity growth. The reforms have targeted a broad range of industries; dissolved state monopolies; and addressed labor market, education, and governance shortcomings. The analysis suggests that external headwinds have masked evidence that the reforms are achieving many of the intended transformations in the targeted sectors. Priority should go to reforms targeting the rule of law and attendant improvements in security and reduction of corruption. These will not only improve the business environment but are key to the success of existing reform efforts.
November 13, 2017
Spain: Financial Sector Assessment Program-Technical Note-Impaired Assets and Nonperforming Loans
Description: This Technical Note discusses the findings and recommendations in the Financial Sector Assessment Program for Spain in the areas of impaired assets and nonperforming loans (NPLs). The size of the problem assets varies significantly across banks and is concentrated in those exposed to residential mortgages and real-estate-related firms, whose NPLs represent about 57 percent of all NPLs. A tough stance on the implementation of the European Central Bank (ECB) guidance on NPLs is desirable. Ideally, in the case of Spain, the cleanup should be completed before the expiration of the ECB’s long-term support. Targets to reduce problem assets should be ambitious, and failure to comply should have prudential consequences.