Country Reports
2017
June 28, 2017
Peru: 2017 Article IV Consultation-Press Release; and Staff Report
Description: This 2017 Article IV Consultation highlights Peru’s average growth of more than 5.25 percent since 2000, which has led to significantly reduced unemployment and poverty. Inflation is in low single digits, the fiscal position has strengthened, and dollarization has declined markedly. Growth is expected to remain high relative to the region. In particular, GDP growth is projected to slow to about 2.7 percent in 2017, before bouncing back to over 3.75 percent in 2018, as reconstruction spending filters through the economy and projects delayed owing to the Odebrecht scandal start to catch up. Inflation should gradually return to the target range as weather-related factors abate and food price inflation declines.
June 28, 2017
Guyana: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana
Description: This 2017 Article IV Consultation highlights the expansion of Guyana’s real economic activity by 3.3 percent in 2016. Subdued agricultural commodity prices, bad weather, and delays in public investment weighed down activity, while large increases in gold output helped support growth. Consumer prices increased by 1.5 percent in the 12 months ending in December 2016 as weather-related shocks to food prices reversed the deflationary trend. The macroeconomic outlook is positive for 2017 and the medium term. Growth is projected at 3.5 percent in 2017, supported by an increase in public investment, continued expansion in the extractive sector, and a recovery in rice production.
June 28, 2017
Peru: Selected Issues
Description: This Selected Issues paper presents an overview of the financial deepening achievements and challenges in Peru. Although substantial progress has been made on various indicators of financial deepening, Peru lags regional and income peers in several respects. Peru’s overall financial development index is modest, and its stage of financial depth does not fully align with domestic fundamentals. Private credit to GDP at about 40 percent of GDP is one of the lowest in the region, and below the expected level for a country at Peru’s income and population. Studies also show that Peru has a negative gap in the depth and efficiency of financial institutions, which could reflect weak frameworks for obtaining or seizing collateral.
June 27, 2017
Costa Rica: 2017 Article IV Consultation-Press Release; and Staff Report
Description: This 2017 Article IV Consultation highlights the growth of Costa Rica’s economy at its estimated trend rate of about 4.25 percent and an essentially closed output gap. Headline inflation turned positive again in the second half of 2016 and is rising moderately, with both headline and core indicators still below the 2–4 percent target range. The colón has been depreciating moderately since mid-2016, while reserves have declined despite the narrowing in the current account deficit. In 2017, growth is anticipated to slow marginally to 4 percent, driven by weaker terms of trade and more stringent financial conditions.
June 27, 2017
Nicaragua: 2017 Article IV Consultation-Press Release; and Staff Report
Description: This 2017 Article IV Consultation highlights Nicaragua’s robust macroeconomic performance in 2016. Real GDP grew by 4.7 percent in 2016, supported by strong domestic demand, while inflation remained subdued at 3.1 percent as of the end of 2016, owing largely to the contribution of food prices. The current account deficit for 2016 is estimated to have narrowed to 8.6 percent of GDP, compared with 9 percent in 2015. This consolidation is largely explained by maquila exports, which have been better captured owing to improvements in statistical compilation. The current account deficit remained financed by foreign direct investment and other long-term inflows.
June 27, 2017
Costa Rica: Selected Issues and Analytical Notes
Description: This Selected Issues paper describes Costa Rica’s vulnerability to potential policy changes in the United States after the November 2016 presidential election and its effects on Central America. In the near term, the most likely US policy shift is a change in the macroeconomic policy mix, involving an expansionary fiscal policy—implemented initially through tax cuts—and a tighter than previously expected monetary policy stance. The results suggest that Costa Rica could be more affected through the foreign direct investment and trade channels, unlike the rest of Central America, where remittances and immigration play a key role.
June 27, 2017
Nicaragua: Selected Issues
Description: This Selected Issues paper analyzes Nicaragua’s social security system, which is projected to run out of liquid reserves by 2019, several years earlier than anticipated. To avoid burdening the budget, reforms to the system are urgently needed. A deep actuarial, economic, and operational analysis is needed to design a comprehensive reform program. Such a program must ensure that the defined-benefit, pay-as-you-go system can sustain itself for another generation of workers and that improved health care benefits can be maintained. A politically acceptable, pragmatic solution appears within reach. However, the authorities should act quickly to avoid a costly bailout of the system.
June 27, 2017
Republic of Poland: Technical Assistance Report-Developing a Medium-Term Budget Framework
Description: This Technical Assistance Report discusses the progress made toward developing a medium-term budget framework (MTBF) in Poland. Many of the prerequisites for establishing an MTBF have already been satisfied in Poland. The annual budget has a high degree of credibility; macroeconomic projections are generally accurate; and fiscal rules on debt, expenditure, and the deficit provide sufficient guidance to fiscal policy in the medium term. However, some weaknesses remain that should be addressed either in parallel or as part of the MTBF reform. The design of the MTBF should be carefully considered to meet the government’s fiscal objectives while operating within current capabilities.
June 26, 2017
Ireland: 2017 Article IV Consultation-Press Release; and Staff Report
Description: This 2017 Article IV Consultation highlights Ireland’ continued position among the euro area’s top growth performers. Real GDP expanded by 5.2 percent in 2016, supported by a healthy expansion of private consumption and buoyant investment, including construction. Strong broad-based job creation brought unemployment down to 6.4 percent in May, its lowest level in a decade, while inflation remained low as the recent pickup in energy prices and upward pressure from services were partly offset by the impact of weakness in the British pound. The outlook remains positive, but with substantial, mainly externally driven, downside risks. Real GDP is projected to grow at 3.9 percent in 2017, propelled by strong domestic demand.
June 26, 2017
Czech Republic: Selected Issues
Description: This Selected Issues paper analyzes the Czech Republic’s monetary policy after removal of the exchange rate floor. The koruna-euro exchange rate floor, which had been in place for more than three years, was eliminated in the beginning of the second quarter of 2017. Exit poses a number of challenging policy questions, including on the optimal monetary policy in its aftermath. The simulations indicate that a monetary policy response that is ex-post too loose is likely to be less costly than a monetary policy response that is ex-post too tight. This suggests that a gradual approach to interest rate increases is advisable.