The Slovak Republic faced the pandemic from a position of strength with fiscal space and comfortable banking sector buffers. Effective policy support, through measures aimed at preserving jobs, providing liquidity support, and ensuring credit supply, have limited the economic fallout. Output is expected to reach pre-crisis level before the end of 2021, but uncertainty is high.
The COVID-19 pandemic has caused dramatic loss of human life and major damage to the European economy, but thanks to an exceptionally strong policy response, potentially devastating outcomes have been avoided.
This paper focuses on the following key issues of the Slovenian economy: export competitiveness, corporate financial health and investment, European Central Bank (ECB) quantitative easing, and financial sector development issues and prospects. Slovenia’s exports have been the main contributor to GDP growth in recent years. In particular, by 2015 exports of goods and services had increased by 20 percentage points of GDP compared to their postcrisis low in 2009. Preceding the global economic slump in 2008, bank credit in Slovenia fueled corporate investment. The past few years have witnessed substantial monetary easing by the ECB. With inflation running well below target, the ECB has been pursuing unconventional monetary policy-easing actions.
The Czech economy has turned in a solid performance, and the medium-term prospects are good. The short-term outlook is positive, although downside risks are significant The outlook for low underlying inflation leaves scope for monetary policy to continue to support growth. The government's resolve to address the deterioration in the fiscal accounts has been commended. The challenge now is to implement the proposals and prepare for medium-term output. Redressing shortcomings of the judicial and legal systems is the top priority for structural reform.
This Selected Issues paper and Statistical Appendix examines the revenue and expenditure trends of the Croatia from a cross-country perspective and illustrates the medium-term fiscal outlook under two scenarios: one assumes gradual fiscal adjustment and structural reforms; the other assumes stronger fiscal adjustment and a more aggressive approach to structural reforms. The paper analyzes Croatia’s revenue structure to provide a perspective for the medium-term revenue policy. It also identifies the expenditure items that could be streamlined over the medium term, and presents alternative medium-term fiscal frameworks.
The more advanced Central and Eastern European Countries (CEECs) face an evolving set of considerations in choosing their exchange rate policies. On the one hand, capital mobility is increasing, and this imposes additional constraints on fixed exchange rate regimes, while trend real appreciation makes the combination of low inflation and exchange rate stability problematic. On the other hand, the objectives of EU and eventual EMU membership make attractive a peg to the euro at some stage in the transition. The paper discusses these conflicting considerations, and considers the feasibility of an alternative monetary framework, inflation targeting.
Interest rate policy in the newly reforming Central and Eastern European countries has generally been geared toward establishing positive real interest rates and defending the exchange rate. The principal instrument for this task has been administrative increases in controlled interest rates. This paper examines the effect of these adjustments on inflation, the real interest rate and the exchange rate. It points out the risk that when financial discipline over enterprises is weak raising nominal interest rates may do little more than raise credit growth, the rate of depreciation and ultimately inflation. Simulations attempt to shed light on the importance of these linkages.
The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.