Country Reports
2024
September 13, 2024
Denmark: Selected Issues
Description: This Selected Issues paper discusses the macroeconomic impact of the pharmaceutical sector. The analysis focuses on Novo Nordisk, the leading pharmaceutical company in Denmark, and its productivity impact on the rest of the economy. Empirical evidence suggests only weak correlations between productivity shocks at Novo Nordisk and overall economic growth, as well as between Novo Nordisk’s productivity and that of other firms. The findings suggest there is limited risk that Denmark’s booming pharmaceutical company would become its “Nokia.” Although the pharmaceutical sector will be a key driver of growth, most of its production occurs overseas under Danish ownership. As a result, its linkages with the rest of the domestic economy, in terms of employment and supply chains, are somewhat limited. The empirical results also indicate limited spillover effects through productivity channels. However, the empirical results may underestimate the influence of Novo Nordisk due to limited data.
September 13, 2024
Denmark: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Alternate Executive Director for Denmark
Description: The 2024 Article IV Consultation highlights that The Danish economy has continued to expand at a robust pace, driven by an exceptional surge in the pharmaceutical. In contrast, the rest of the economy has remained relatively subdued, aside from the maritime and information and communication technology industries, reflecting sluggish demand. Meanwhile, with a decline in global energy prices and lacklustre domestic demand, inflationary pressures have largely dissipated in recent months. The policy priority is to manage fiscal policy in a manner consistent with near-term cyclical conditions while taking account of long-term spending pressures without risking fiscal sustainability. Other priorities include ensuring financial stability and pursuing structural reforms to lift potential growth and achieve climate goals. The financial system remains sound, but risks remain. Continued reform efforts are necessary to boost labor supply and enhance productivity, aiming to sustain the welfare state. Reform priorities include enhancing work incentives, addressing skill mismatches by accepting more foreign talent, modernizing active labor market policies, and enhancing education outcomes for children with immigrant backgrounds. Further actions are necessary to achieve climate mitigation targets and prepare for climate change.
September 13, 2024
Dominican Republic: 2024 Article IV Consultation-Press Release and Staff Report
Description: The 2024 Article IV Consultation explains that a track record of sound policies and institutional policy frameworks has helped the Dominican Republic achieve robust and resilient economic growth and low inflation over the last two decades. Effective policies contributed to a growth moderation that appropriately supported inflation’s rapid and sustained return to its target last year and then aided the recovery, while close monitoring of the financial sector supported macro-financial stability. Planned enhancements to policy frameworks and deepening structural reforms—in particular, comprehensive fiscal and electricity reforms—have the potential to further support stability, competitiveness, and inclusive growth. The financial sector remains resilient and well capitalized, and efforts to bring the regulatory framework up to the latest international standards should continue. The fiscal policy framework and spending and revenue efficiency can be further enhanced by continued improvements to public financial management and further strengthening of revenue administration. Reforms to education and the labor market, alongside further improvements to social outcomes and implementation of climate adaptation and mitigation policies will be critical to support inclusive and resilient growth and continue to reduce vulnerabilities.
September 11, 2024
Kingdom of Lesotho: Selected Issues
Description: This Selected Issues paper delves into few applications of machine learning (ML), with a particular application to economic forecasts in Lesotho. Amid delayed and often revised gross domestic product data, this paper explores the potential of ML to provide real-time insights into growth and inflation trends, crucial for informed policymaking. By leveraging nontraditional data and employing a variety of ML models, the paper presents a comprehensive analysis of current economic activity, evaluates the accuracy of standard statistical measures, and forecasts future inflation trends. The findings underscore the efficacy of ML in reducing prediction errors and highlight the significant role of alternative data in circumventing the limitations posed by traditional economic indicators. This paper contributes to the broader debate on the application of advanced computational techniques in economic forecasting, offering valuable insights for policymakers in Lesotho and similar countries grappling with data constraints and the need for timely economic analysis.
September 11, 2024
Uganda: Selected Issues
Description: This Selected Issues Paper analyzes potential macro-financial risks from cross-sectoral exposures in Uganda by leveraging on the Balance Sheet Approach framework. It presents evidence on the macro-financial linkages in Uganda using the Network Map and Financial Input-Output approaches. On the one hand, the Network Map analysis shows the cross-sectoral exposures in which potential build-up of macro-financial vulnerabilities may arise. On the other hand, the Financial Input-Output tool simulates relevant scenarios in the context of Ugandan economy such as currency depreciation and increases in government interest payments on debt held by banks. The purpose of the scenario exercises is to strengthen the monitoring of the developments in key economic sectors in Uganda. While the banking sector, which dominates the Ugandan financial system, remains fundamentally sound, there are pockets of vulnerabilities resulting from the growing sovereign-bank nexus and cross-border exposures of the Near Field Communication technology sector which require close vigilance.
September 11, 2024
Kingdom of Lesotho: 2024 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Kingdom of Lesotho
Description: The 2024 Article IV Consultation discusses that Lesotho’s gross domestic product growth has improved modestly, picking up to 2.2 percent in the fiscal year ending in March 2024. Inflation increased in the second half of 2023, peaking at 8.2 percent in January 2024. However, upward pressures have eased, and inflation has since fallen to 6.5 percent in June. The outlook for Lesotho’s fiscal and external balances has improved significantly owing to windfall transfers from the Southern African Customs Union and renegotiated water royalties. Key recommendations include swiftly establishing a well-governed savings framework (stabilization fund) to ensure that additional revenues are saved wisely and spent strategically, in line with the authorities’ national development goals. To this end, the authorities are encouraged to prioritize high-quality public investment, strengthen internal controls to ensure transparency and accountability, and address governance and corruption vulnerabilities. Accompanying recommendations include: enhancing public financial management, improving the business environment, and increasing financial inclusion.
September 11, 2024
Uganda: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Uganda
Description: The 2024 Article IV Consultation highlights that Uganda has navigated the post pandemic recovery well due to sound macroeconomic policies. The economic recovery is strengthening with low inflation, favorable agricultural production, and strong industrial and services activity. While public debt is sustainable, low tax revenues constrain Uganda’s fiscal policy space. Strengthening domestic revenue mobilization and budgetary and cash management practices are key to securing a durable fiscal space. The Bank of Uganda’s tight monetary policy stance has helped anchor inflation expectations and counter external sector pressures. Going forward, monetary policy should remain data driven to ensure price stability and further financial deepening. Continued flexibility of the exchange rate is important to build up adequate foreign exchange reserves. Uganda should continue its efforts to create fiscal space through revenue mobilization and better expenditure discipline, vigilant monetary policy, and exchange rate flexibility, using future oil revenue to address growth impediments and improve social development while advancing governance reform and financial inclusion. Addressing governance deficiencies and regulatory burdens and enhancing regional trade integration are critical to unlocking Uganda’s growth potential.
September 10, 2024
Botswana: 2024 Article IV Consultation-Press Release and Staff Report
Description: The 2024 Article IV Consultation discusses that Botswana’s economic growth is expected to slow to 1 percent in 2024 primarily because of a diamond market contraction, before picking up next year. Inflation has declined sharply since the peak of mid-2022 and returned to the central bank’s medium-term objective range of 3–6 percent, where it is expected to remain in the medium term. Some fiscal relaxation is warranted this year given the fall in mineral revenues, but the ambitious capital budget should be streamlined to contain the deterioration of the deficit and prioritize projects with the highest value for money. The monetary policy stance is appropriate, but monetary policy transmission remains limited, requiring further deepening of the interbank, credit, and government bond markets along the transmission chain. Reducing inequality and unemployment requires a more job-intensive, private sector-led, and export-oriented growth model. Reform of state-owned enterprises, improved infrastructure for doing business (internet, energy, and logistics), trade facilitation measures, and a more efficient social protection system should be prioritized.
September 10, 2024
Botswana: Selected Issues
Description: This Selected Issues paper discusses the rationale for and design of a new Sovereign Wealth Fund (SWF) in Botswana. It reviews the causes of declining financial reserves and calculates fiscal targets that would be needed to achieve insurance and intergenerational equity objectives. While debt ratios have been steady, the government has financed these deficits by drawing down its assets. Intergenerational equity may be better served by creating financial assets, rather than through investment spending, although the two are not mutually exclusive. Botswana has tended to allocate resource revenues primarily to physical and human investment. Before discussing SWF design, it is important to consider the level of savings that the government requires to achieve its policy objectives. There are many reasons why a government may want to generate savings and manage them in a SWF. IMF concludes that a SWF could provide a useful institutional framework to support rebuilding buffers, but achieving significant savings to meaningfully fund an SWF would require much tighter fiscal policy than has been observed in recent years.
September 5, 2024
Republic of Latvia: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation highlights that the Latvian economy contracted with significant disinflation. Amid high uncertainty, growth is projected to rebound, but risks are tilted to the downside. Considering the improving outlook, the IMF Staff recommends a less expansionary, neutral fiscal stance for 2024 and a tighter fiscal stance in 2025. Although Latvia has some fiscal space, structural fiscal measures are needed to provide buffers for medium to long term spending pressures. Although the financial sector has so far been resilient, continued monitoring of macrofinancial vulnerabilities and spillovers is warranted. While the current macroprudential policy stance is broadly appropriate, the recent adjustment to the borrower-based measures for energy-efficient housing loans should be reconsidered. The overall policy stance strikes the right balance between maintaining financial stability and the need to extend credit to the economy. However, borrower-based macroprudential measures should be relaxed only when their presence is overly stringent from the financial stability perspective.