Country Reports

September 17, 2015

Norway: Financial Sector Assessment Program-Technical Note-Oversight and Supervision of Financial Market Infrastructure, and Selected Issues in the Payment System

Description: This Technical Note reviews the oversight and supervisory framework for systemically important Financial Market Infrastructure (FMI) in Norway. Norway has a modern and stable FMI. The assessment results suggest an effective supervision and oversight framework supported by a strong legal basis, adequate oversight resources, and good domestic and foreign cooperation between authorities. All Norwegian FMIs have completed assessments against the new international standards and are in the process of improving observance where needed. The authorities could consider strengthening their cooperation to address the risks from outsourced critical infrastructures and tighter interdependencies across FMIs. The authorities could also consider additional measures to strengthen the operational resiliency of payment systems.

September 17, 2015

Norway: Financial Sector Assessment Program-Technical Note-Linkages and Interconnectedness in the Norwegian Financial System

Description: This Technical Note reviews linkages and interconnectedness in the Norwegian financial system for Norway. Norway’s banks have important connections with global financial centers, but regional links are also important. Norwegian banks are very dependent on global financial centers as sources of funding and to hedge currency risks. Cross-sectoral exposures of Norway’s banks, insurance companies, and real estate companies are significant and extend beyond the Nordic region. The authorities are encouraged to expand their current monitoring efforts of crossborder and cross-sectoral exposures of the Norwegian financial sector, and to conduct regional stress tests. For this effect, the authorities can resort to market data and, if available, to balance sheet data of exposures at the individual financial institution level.

September 17, 2015

Norway: Financial Sector Assessment Program-Technical Note- Stress Testing the Banking Sector

Description: This Technical Note discusses results of banking sector stress tests on Norway. The Norwegian banking sector is generally well prepared to cope with possible external shocks, but imbalances have built up in recent years and could pose challenges. The stress-testing exercise included a comprehensive analysis of solvency and liquidity risks in the banking sector. The stress test results show that while the banking sector is highly resilient, it could experience challenges in case of severe macroeconomic shocks, as assumed in the adverse scenarios. The stress tests also illustrate that the banking system remains vulnerable to liquidity risks, due in part to scarce liquidity buffers in Norwegian krone.

September 16, 2015

Israel: Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Israel

Description: This 2015 Article IV Consultation highlights that Israel’s economy has been doing well and near-term growth prospects are favorable. Following growth of 2.6 percent in 2014, the economy is expected to expand by about 2.5 percent in 2015 and 3–3.3 percent each year in the medium term. Employment creation has been remarkable—growing by 3.5 percent annually—and unemployment is at multi-decade lows. Inflation has been negative, but this trend reflects temporary external factors, not domestic weakness. Debt has declined to 67 percent of GDP from a peak of 94 percent of GDP in 2003 but is expected to increase for the first time since 2009, following the upward revisions to the deficit targets.

September 16, 2015

Republic of Slovenia: Technical Assistance Report-Establishing a Spending Review Process

Description: This paper discusses key findings and recommendations of the Technical Assistance report on establishing a spending review process in Slovenia. Slovenia’s fragile fiscal situation requires further consolidation to ensure that the upward trajectory of public debt does not threaten long-term fiscal sustainability. Spending in the education sector is the fourth-highest spending level. Spending pressures also need to be explicitly identified, quantified, and included in the spending review to better inform the government’s decision making process. There is also a need to update existing performance information associated with government expenditure programs to ensure that more meaningful information focused on achieving desired outcomes is developed to better inform future reviews.

September 16, 2015

Malaysia: Technical Assistance Report-Strengthening Outcome Based Budgeting

Description: This Technical Assistance report reviews the reforms undertaken by the Government of Malaysia for strengthening outcome-based budgeting (OBB). OBB builds on the previous output-based modified budgeting system, which was in place for more than two decades. OBB aims to improve the efficiency, the performance, and the prioritization of expenditures by aligning national and ministerial outcomes with programs and budgetary resources and by integrating planning, budgeting, and evaluation. OBB has made good progress. The National Budget Office has assisted nine pilot ministries to redesign their program structure to link to outcomes and has plans to assist all ministries. There is an increased awareness in government of the importance of outcomes.

September 16, 2015

Israel: Selected Issues

Description: This Selected Issues paper examines labor productivity in Israel. Israel’s GDP per capita is low relative to the United States despite high labor input, as labor productivity is low. Catch-up of labor productivity to the United States stopped in the 1980s and relative labor productivity has since declined. Low labor productivity is the result of a low capital-to-labor ratio—kept low by high employment growth—and low total factor productivity growth. The latter may reflect lack of competition and product market restrictions, which are among the highest in advanced economies. Boosting competition, lowering product-market restrictions, and improving the quality of education and infrastructure would help boost productivity.

September 16, 2015

Republic of Congo: 2015 Article IV Consultation-Press Release; and Staff Report

Description: This 2015 Article IV Consultation highlights that Congo’s growth was strong in 2014 and inflation was moderated, but the country has been hit hard by the oil price shock. Growth rose to 6.8 percent in 2014, driven by a rebound in oil production. The fiscal deficit amounted to 8.5 percent of GDP in 2014, a near doubling from 2013, owing mostly to increased spending and the lower oil revenues. The near- and medium-term outlook will be shaped by developments in the oil sector and the path and quality of fiscal adjustment. GDP growth in 2015 is projected at 1 percent and to average about 3 percent per year during 2015–20.

Notes: Also Available in French

September 16, 2015

Republic of Congo: Selected Issues

Description: This Selected Issues paper analyzes poverty and inequalities in Congo and the public expenditure priorities for inclusive growth. Congo’s outlook of more limited fiscal space, in view of the need for fiscal consolidation, makes it all the more important that public expenditure programs maximize their impact. This paper highlights the scope to reorient public expenditure policies to better address poverty and inequality. Based on the recent World Bank Public Expenditure Management and Financial Accountability Review, the analysis notes that recent economic growth has only translated into relatively modest reductions in poverty. Against this background, recommendations are developed that can help guide future budget allocations with a view to promoting inclusion and reducing inequality.

Notes: Also Available in French

September 15, 2015

Republic of Equatorial Guinea: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Equatorial Guinea

Description: This 2015 Article IV Consultation highlights that Equatorial Guinea’s recent economic performance has been weak, notwithstanding the high-quality infrastructure that has been built. The current account deficit has progressively increased to about 10 percent of GDP by 2014 as a result of lower exports from maturing hydrocarbon fields combined with high import levels associated with the public infrastructure program, although there is considerable uncertainty about this figure given very weak external sector statistics. The main near-term risk to the economic outlook is a slower-than-expected fiscal adjustment that could result in the depletion of fiscal buffers and accumulation of public debt. Moreover, an insufficient effort to address a weak business climate and attract foreign investment would impede diversification and potential nonhydrocarbon growth.

Notes: Also Available in Spanish