Country Reports
2014
December 11, 2014
South Africa: Staff Report for the 2014 Article IV Consultation
Description: This 2014 Article IV Consultation highlights that South Africa’s growth has slowed in recent years, specifically relative to other emerging markets. Although weak trading partners’ growth contributed to the slowdown, increasingly binding structural constraints, such as protracted strikes and electricity constraints, have been important factors. Unemployment remains high at 25.5 percent. Notwithstanding expenditure discipline, the general government budget deficit was 4.5 percent of GDP in 2013, and public debt rose to 45 percent of GDP from 27 percent in 2008. The outlook is lackluster with considerable risks. Growth is projected to slow to 1.4 percent in 2014 and rebound only modestly to 2.1 percent in 2015 on improved industrial relations.
December 9, 2014
Kuwait: Selected Issues
Description: This Selected Issues paper discusses the designing and implementing of Kuwait’s fiscal policy for the medium term. Fiscal policy has a major role to play in supporting macrostability and diversification. The fiscal strategy design and implementation on a yearly basis are based on a few key areas such as determining targets or ceilings for major fiscal parameters for a three-year rolling framework with binding next budget year and indicative two outer years, establishing a clear process for expressing policy objectives and their link to expenditure, etc. The illustrative budget sequencing with the fiscal strategy spearheading medium-term fiscal policymaking and linked to the annual budget process would support fiscal policy implementation.
December 9, 2014
Denmark: Staff Report for the 2014 Article IV Consultation
Description: This 2014 Article IV Consultation highlights that the Danish economy is recovering slowly and unevenly. The economy contracted slightly in 2013, but it looks likely to accelerate modestly in 2014. Growth is held down by a trend decline in North Sea oil and gas production as well as exports to euro-area partners. At the same time, private domestic demand and non-oil exports are supporting growth. The recovery is likely to continue but remain fragile. Annual growth is estimated at 0.7 percent in 2014, projected to increase to 1.4 percent in 2015, and trend to slightly above 2 percent thereafter.
December 9, 2014
Denmark: Report on Observance of Standards and Codes (ROSC)
Description: This paper discusses findings of the Report on Observance of Standards and codes for Denmark. Denmark has a high level of compliance with the Basel Core Principles for Effective Banking Supervision. The Danish Financial Supervisory Authority (DFSA) has the appropriate legal authority to carry out supervision effectively, and its risk based approach has focused well on the key elements of risk within its banking system. Its powers and supervisory approach have evolved significantly since the recent global crisis, and the DFSA emerged as a proactive supervisor. Its overall supervisory approach is sound, and the compliance with the credit-risk and capital adequacy related principles is uniformly high.
December 9, 2014
Denmark: Selected Issues
Description: This Selected Issues paper examines the household debt situation in Denmark and factors that have contributed to the high level of household debt in the country. Various factors seem to account for the size of household debt, including large pension assets, a highly developed mortgage market, the availability of flexible mortgage products such as deferred amortization loans, indirect subsidies through tax preferences for home ownership, and a regulated rental market that limits mobility. The paper highlights that high household debt could pose direct risks to financial stability if the number of mortgage loan defaults rises sharply in the face of adverse shocks.
December 9, 2014
Kuwait: Staff Report for the 2014 Article IV Consultation
Description: This 2014 Article IV Consultation highlights that economic activity in Kuwait picked up in 2014. Non-oil growth is projected at 3.5 percent driven by a combination of continued increase in domestic consumption and some pick-up in government capital spending and private investment. Flat oil production would keep the overall real GDP growth positive at 1.3 percent. The average inflation rate is forecast to remain at about 3 percent. The current account and fiscal surpluses are expected to remain high. The medium-term economic outlook is favorable. Non-oil GDP growth is expected to pick up to 4 to 5 percent in the medium term, supported by government investment in infrastructure and the oil sector, and by consumption.
December 9, 2014
Denmark: Financial System Stability Assessment
Description: The paper discusses findings of the Financial System Stability Assessment for Denmark. The Danish authorities have taken important steps to improve financial system resilience. Financial regulation and supervision have been strengthened. A new bank resolution framework that includes bail-in of creditors has been adopted and deployed to resolve small- and medium-sized banks. An institutional framework for macroprudential policy has also been adopted. Recent legislation requires maturity extension of covered bonds in stress situations, with the aim of reducing refinancing risk in the mortgage finance system. Although stress tests suggest that financial stability risks are contained, the financial system’s large size and interconnectedness call for additional measures to further strengthen resilience.
December 5, 2014
Kingdom of the Netherlands—Netherlands: Selected Issues Paper
Description: This Selected Issues paper analyzes the housing prices, consumption, and the household debt overhang in the Netherlands. Deflated housing prices that were fueled by robust borrowing often leave in their wake households with heavy debt burden. This “debt overhang” forces households into deleveraging—reducing their level of debt to sustainable levels. When deleveraging is brought about through reduced household consumption, it can contribute to a protracted “balance sheet recession” as appears to be the case in the Netherlands. This paper estimates a simultaneous equations model of the Dutch economy using a three-stage least squares approach. Empirical results are supportive of the hypothesis that housing prices strongly affect private consumption.
December 5, 2014
Turkey: Selected Issues
Description: This Selected Issues paper examines the external imbalance situation in Turkey. Turkey’s current account deficit is expected to remain elevated at about 5.5 to 6 percent of GDP through 2019. Reducing the deficit to a more sustainable level about 2.5 to 3 percent of GDP should be a key policy priority. Applying the Global Integrated Monetary and Fiscal Model, the paper quantifies the impact of four different approaches in reducing the current account deficit. The analysis shows that policies that directly increase private or public savings can reduce the external imbalance without reducing private investment and that they have relatively modest negative growth implications.
December 5, 2014
Turkey: Staff Report for the 2014 Article IV Consultation
Description: This 2014 Article IV Consultation highlights that Turkey’s economy has grown on average by 6 percent annually since 2010, but this has come at the expense of a large external deficit, making the economy sensitive to changes in external financing conditions. Macroeconomic policies have been too accommodative, inflation is high and well above the authorities’ target, real policy interest rates remain negative, and the exchange rate continues to be stronger than suggested by fundamentals. The main risk for Turkey remains a capital flows reversal, associated with monetary policy normalization in advance economies or changes in the country risk premium. Other risks center on slower European growth, geopolitical issues, and the strength of the policy framework.