Country Reports
2015
March 19, 2015
Indonesia: Selected Issues
Description: This Selected Issues paper looks at links between Indonesia’s commodities sector and recent corporate sector and banking system performance. On the production side, oil and natural gas output has fallen since 2010, with existing fields in decline, while production of coal, palm oil, and rubber output has increased steadily. Recent trends in commodity exports have had a significant impact on corporate revenues and profits. For corporations operating in the nonrenewable commodities sector, liabilities and debt ratios have increased significantly in recent years. This paper highlights that risks facing the commodities sector will likely stay elevated in the near term, given slowing growth of several major trading partners and the outlook for lower commodity prices.
March 13, 2015
Iceland: Selected Issues Paper
Description: This Selected Issues paper examines implications of capital account liberalization in Iceland. Capital controls were critical in 2008 to avoid a more severe collapse of the Icelandic economy. Six years later, capital inflows have been liberalized, but most outflows remain restricted. Iceland has used the breathing room to reduce flow and stock vulnerabilities, strengthen institutions, and prepare for the lifting of capital controls. Simulations using the central bank’s Quarterly Macroeconomic Model (QMM) suggest that, compared with the 2008 crisis episode, the economy can better withstand the impact of an abrupt removal of capital controls. However, the outcome would be dependent on a number of factors, including resident depositor behavior.
March 13, 2015
Iceland: 2014 Article IV Consultation and Fifth Post-Program Monitoring Discussions-Staff Report; Press Release; and Statement by the Executive Director for Iceland
Description: This 2014 Article IV Consultation highlights that Iceland has reached a relatively strong macroeconomic position with good growth prospects. Unemployment continues to trend down, now at 4 percent. Growth is expected to pick up to about 3 percent over 2015–17, supported by robust domestic demand and tourism. Consumption will be boosted by household debt relief and—together with net trade—will benefit from favorable commodity prices. Good progress has also been made in improving the financial stability framework, but gaps remain.
March 12, 2015
Ukraine: Request for Extended Arrangement Under the Extended Fund Facility and Cancellation of Stand-By Arrangement
Description: This paper discusses Ukraine’s Request for Extended Arrangement Under the Extended Fund Facility (EFF) and Cancellation of Stand-by Arrangement (SBA). Despite tangible progress under the SBA, the crisis in Ukraine has increased its balance of payments and adjustment needs beyond what can be achieved under the current program. The authorities’ new four-year IMF-supported program aims to decisively address these challenges. The program lays out a strategy to restore financial and economic stability and resolve long-standing structural obstacles to growth. In view of Ukraine’s large external financing needs and the authorities’ strong policy commitments, the IMF staff supports approval of Ukraine’s four-year Extended Arrangement under the EFF with access equivalent to SDR 12.348 billion.
March 12, 2015
Belgium: 2015 Article IV Consultation—Staff Report; and Press Release
Description: This 2015 Article IV Consultation highlights that Belgian economy has shown considerable resilience but the outlook is weighed down by weak demand in Europe. Healthy private balance sheets, integration with Germany, and employment support schemes have helped sustain employment and economic activity. However, output is still well below potential and with, subdued growth prospects, job creation remains insufficient. Fiscal adjustment is expected to resume after a pause in 2014. The pace of adjustment targeted by the authorities for 2015–16 is appropriate given the level of debt and related risks.
March 12, 2015
Belgium: Selected Issues
Description: This Selected Issues paper illustrates the recent evolution in Belgian housing prices. Belgian housing prices peaked at the end of 2013 after a persistent increase that was almost continuous for 30 years. The stabilization of prices, combined with policy changes on the fiscal and macro-prudential fronts, raises the question how housing prices are likely to evolve and how a price decline would affect the Belgian economy. The paper assesses the risk of a rapid price correction and the potential repercussions for the real economy. It also argues that an orderly and limited decline in housing prices—coupled with a marginal negative effect on the real economy—is the most plausible scenario.
March 11, 2015
Romania: Fiscal Transparency Evaluation
Description: The paper discusses recommendations made in a fiscal transparency evaluation report for Romania. Seven recommendations are made to improve the level of information available to decision makers and the public. The report recommends reducing fragmentation of existing fiscal reporting and expanding the institutional coverage to include the wider public sector. It also recommends improving the timeliness, quality, and integrity of fiscal reports and financial statements through publishing reconciliations between cash and accrual based reports and enforcing strict timelines for publication of financial statements.
March 11, 2015
Republic of Armenia: Selected Issues Paper
Description: This Selected Issues paper analyzes scope for further de-dollarization policies in Armenia. High financial dollarization makes Armenia more vulnerable to external shocks and limits its capacity to respond. The de-dollarization strategy is broad and comprehensive, and has achieved a reduction of deposit dollarization during the past few years. Additional efforts should focus on reducing inflation volatility and external imbalances, using prudential regulations to increase foreign currency liquidity in the banking system, and strengthening the monitoring of currency mismatches. International experience suggests, however, that further reductions in dollarization are likely to occur only gradually.
March 11, 2015
India: Selected Issues Paper
Description: This Selected Issues paper examines how surges in global financial market volatility spill over to emerging market economies (EMs) including India. The results suggest that a surge in global financial market volatility is transmitted very strongly to key macroeconomic and financial variables of EMs, and the extent of its pass-through increases with the depth of external balance-sheet linkages between advanced countries and EMs. The paper also looks at food inflation, which has often been singled out as a key driver of India’s high and persistent inflation.
March 11, 2015
India: Staff Report for The 2015 Article IV Consultation
Description: This 2015 Article IV Consultation highlights that India’s near-term growth outlook has improved, and the balance of risks is now more favorable, helped by increased political certainty, several positive policy actions, improved business confidence, and reduced external vulnerabilities. Growth is projected at 5.6 percent for FY 2014/15, picking up to 6.3 percent in FY 2015/16, as a result of the revival in industrial and investment activity. However, weaknesses in India’s corporate and bank balance sheets will weigh on credit growth, and fiscal restraint and a tight monetary stance will act as headwinds in the near term, offsetting the positive growth impact of the improved commodity terms of trade.