Country Reports
2022
July 1, 2022
Côte d’Ivoire: 2022 Article IV Consultation-Press Release; and Staff Report
Description: This 2022 Article IV Consultation with Côte d’Ivoire highlights that the Ivorian economy proved resilient to the coronavirus disease 2019 pandemic. The economy recovered strongly in 2021, with growth estimated at 7 percent, while annual inflation rose to 4.2 percent due to external and supply shocks. The overall fiscal deficit reached 5.1 percent of gross domestic product, lower than anticipated, mainly due to improvements in customs collection and tax administration which offset higher security spending. The deterioration in the external environment linked to the war in Ukraine and regional security challenges are expected to weigh on the macroeconomic outlook in 2022. The new social program of the government can continue enhancing human capital. While the country made significant progress in broadening access to education over recent years, further efforts aimed at improving the quality of basic education and professional training systems would help easing skills mismatch in the labor market. Despite notable progress, ensuring equitable access to health care remains a priority.
June 30, 2022
Slovak Republic: 2022 Article IV Consultation-Press Release; and Staff Report
Description: This 2022 Article IV Consultation discusses that the war in Ukraine has clouded the outlook for the Slovak economy while it was still recovering from the pandemic. The effects of the war are already felt through surging commodity prices, input shortages, subdued confidence, weaker global demand, and heightened energy security risks, given Slovakia’s heavy reliance on Russian energy imports. Fiscal policy needs to be flexible and ready to adjust, while avoiding adding to inflationary pressures. The immediate policy priority is to mitigate the economic fallout of the war and minimize the humanitarian crisis. Rebuilding fiscal buffers should begin once the economy is on a solid growth path, to create room for maneuver and accommodate rising ageing-related spending. Recent reforms to the fiscal framework and the pension system could significantly strengthen public finances. The multiyear spending ceilings should strengthen fiscal discipline, while the link between retirement age and life expectancy will improve fiscal sustainability.
June 30, 2022
Portugal: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal
Description: This 2022 Article IV Consultation presents that after a deeper pandemic-induced recession than the rest of the euro area in 2020, the Portuguese economy gained ground in 2021, and growth strengthened further in 2022:Q1. Policies need to balance short-term urgencies with a smooth transition to private-led growth, rebuilding fiscal space and advancing reforms for stronger growth and a more resilient economy. The 2022 budget remains suitably accommodative, excluding the appropriate unwinding of coronavirus disease 2019 measures. Broad-based measures in response to the energy price shock must be kept temporary and preferably replaced with more targeted measures to mitigate the impact on vulnerable households. Fiscal policy needs to be flexible for further support under severe adverse scenarios or more savings under fiscal over performance. A timely implementation of the National Recovery and Resilience Plan through efficient and transparent planning and budgeting, organization and oversight of the investments and reforms, coupled with reforms to reduce labor market duality and strengthen insolvency regimes would limit scarring, raise living standards, and build a more dynamic economy.
June 30, 2022
Portugal: Selected Issues
Description: This Selected Issues paper on Portugal focuses on how could the coronavirus disease 2019 pandemic affect firm productivity and the speed of the recovery. The pandemic eroded equity positions of Portuguese firms with varying impacts across firms’ size and sectors. The authorities’ swift policy response went a long way in addressing immediate liquidity shortages. The pandemic, however, has left a large share of Portuguese corporates with a debt overhang and at risk of insolvency. Our estimates suggest that the share of zombie firms has risen from about 1 percent prior to the pandemic to 4 percent. The Banco Portuguese de Fomento managed recapitalization scheme—Strategic Recapitalization and Consolidar Programs—have many promising features but may need augmentation and enhanced incentive structures. Broad-based economic recovery underpinned by structural reforms would help spur firm dynamism, productivity growth, and strengthen financial health metrics. Continued strong growth would bolster the operational environment across the spectrum and help reduce balance sheets vulnerabilities. Nonetheless, past crisis recoveries reveal that zombie firms chip away at aggregate productivity, irrespective of the performance of non-zombie incumbents, thereby congesting reallocation. Strong restructuring and insolvency regimes would facilitate effective reorganization and exit of business and optimizing resource reallocation without overwhelming the financial system.
June 29, 2022
Rwanda: Sixth Review Under the Policy Coordination Instrument and Monetary Policy Consultation Clause-Press Release; Staff Report; and Statement by the Executive Director for Rwanda
Description: This paper analyses Rwanda’s Sixth Review under the Policy Coordination Instrument (PCI) and Monetary Policy Consultation Clause. Rwanda continues to implement its Economic Recovery Plan while confronting the lingering effects of the pandemic and the spillovers from the war in Ukraine. Headline inflation has been on the rise since the beginning of the year. Rising inflationary pressures, exacerbated by rising commodity prices, are compounding the policy challenges of balancing economic recovery with maintaining price stability. In view of rising inflation, the National Bank of Rwanda should stand ready to tighten monetary policy more aggressively to anchor inflation expectations. Implementation of the interest-rate-based monetary policy framework should continue with greater exchange rate flexibility to ensure external sustainability. Policies under the PCI continue supporting the recovery from the pandemic, the response to mitigate the headwinds from the war in Ukraine while maintaining macroeconomic stability, and the implement the medium-term fiscal consolidation strategy to preserve debt sustainability. The PCI also supports reform efforts, such as financial inclusion, digitization, and green public financial management (PFM) to deliver a more inclusive and sustainable growth.
June 29, 2022
Romania: Technical Assistance Report on Reforming Personal Income Taxation
Description: This paper describes Romania’s Technical Assistance report on reforming personal income taxation. With one of the lowest revenues in the EU and a projected budget deficit exceeding 7 percent of gross domestic product (GDP), Romania should rely on an array of tax instruments to mobilize revenues. The personal income tax (PIT) plays an integral role in the overall reform to balance revenue, efficiency, and distribution considerations. The PIT should be reformed to support revenue and reduce inequality. It is recommended to introduce a new employment income bracket with a moderate top PIT rate, for example of 20 percent. A combination of 20 percent tax on the top decile of the income distribution and the existing 10 percent on the rest of the income distribution raises revenues by 1 percent of GDP, while leaving the majority of taxpayers unaffected. The taxation of the self-employed and microenterprises should be strengthened to close revenue leakages and safeguard the integrity of the tax system. Freelancers are recommended to pay social security contributions on their total net income, possibly up to a cap.
June 29, 2022
Republic of Serbia: Second Review Under the Policy Coordination Instrument and Request for Modification of Targets-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Serbia
Description: This paper presents Republic of Serbia’s Second Review under the Policy Coordination Instrument and Request for Modification of Targets. Serbia’s economic growth rebounded strongly at 7.4 percent in 2021. The war in Ukraine, energy sector challenges and high inflation are expected to lower growth in 2022 to 3.5 percent amid high uncertainty. Near-term risks are mostly to the downside and include more prolonged or severe spillovers from the war in Ukraine, rising energy prices, energy supply disruptions, more severe trade disruptions, and lower global demand. Serbia’s medium-term outlook, while uncertain, remains favorable, supported by the authorities’ commitment to structural reforms. Macro-financial stability has been maintained notwithstanding the various shocks. All but one end-December 2021 quantitative targets (QTs) were met. The ceiling on current primary expenditure was missed when additional fiscal spending was needed to ensure energy security. While the March 2022 inflation level triggered the consultation clause under the program, monetary policy has been tightened appropriately since October 2021. The IMF recommends completion of the second review under the PCI.
June 29, 2022
Romania: Technical Assistance Report on Improving Revenues from the Recurrent Property Tax
Description: This paper highlights Romania’s Technical Assistance report on improving revenues from the recurrent property tax. The current area-based property tax system in Romania is inefficient, producing revenue below its potential, while the taxable value determination is inequitable and complex. The best guiding principle for the property tax reform is to remind taxpayers that a property tax is in the first instance a benefit tax. Comprehensive property tax reform is complex, requiring both political and technical coordination, informed by realistic timelines. In respect of a recurrent property tax, there are two broad approaches to determine a taxable amount. The first approach—value-based assessment—utilizes methods and techniques that rely on market transactions to inform the value of property. It is generally agreed amongst experts that where it is possible to use the market-value approach in practice, since it provides the better, more buoyant, and more equitable tax base. A value-based assessment tends to better differentiate the tax burden between low-income and high-income households—accounting better for ability-to-pay or vertical equity.
June 27, 2022
The Gambia: Fourth Review under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance and Modification of a Performance Criterion, and Financing Assurances Review - Press Release; Staff Report; and Statement by the Executive Director for The Gambia
Description: This paper discusses The Gambia’s Fourth Review under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance and Modification of a Performance Criterion, and Financing Assurances Review. Despite the various waves of the coronavirus disease 2019 pandemic, the Gambian economy grew by 4.3 percent in 2021 and is expected to grow by 5.6 percent in 2022. Growth is projected to reach 5.6 percent in 2022, predicated on strong remittance inflows, a robust expansion of the construction sector, and large public investment projects. The repercussions of the war in Ukraine intensify inflationary pressures, exacerbate pandemic-related uncertainties, dampen tourism prospects, and disrupt the supply of food and agricultural inputs. The central bank took initial measures to contain inflationary pressures, as inflation reached 11.7 percent at end-April 2022. The authorities remain committed to strong policy measures and structural reforms, including on fiscal management, State-Owned Enterprises, and governance.
June 27, 2022
Guinea-Bissau: 2022 Article IV Consultation and Third Review under the Staff-Monitored Program; Press Release; and Statement by the Executive Director for Guinea-Bissau
Description: This paper discusses Guinea-Bissau’s 2002 Article IV Consultation and Third Review under the Staff-Monitored Program. Guinea-Bissau’s economy has recovered well from the coronavirus disease 2019 pandemic. Growth is projected to reach 3.8 percent in 2022 supported by a continued strong performance of the cashew sector and a relatively stable political situation. The authorities are committed to pursue fiscal consolidation in line with the 2022 budget objectives to continue securing overall debt sustainability. Sustained and inclusive growth will require strengthening governance as well as revenue mobilization to enable priority and infrastructure spending. High levels of nonperforming loans and a large undercapitalized bank need to be addressed to bolster financial intermediation. Also, diversification is needed to create job opportunities and reduce reliance on the cashew nut sector. Program performance at end-December 2021 toward establishing a track record was satisfactory. The 2022 budget and its execution, and the implementation of the tax reform package approved by parliament supports the envisaged fiscal consolidation path. Downside risks remain, including a more protracted high energy and food prices and pandemic that could trigger social tensions and political instability.