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International Monetary Fund. Western Hemisphere Dept.
Economic growth slowed down, but became more broad-based. In 2017, real GDP growth was 2.1 percent, with the non-mining GDP rebounding from its contraction in 2016. The external balance turned negative due to weaker than expected export growth and higher oil prices. Inflation remains relatively low, and the monetary stance accommodative. Oil production is expected to commence in 2020, and additional oil discoveries have significantly improved the medium- and long-term outlook.
International Monetary Fund. European Dept.
This 2017 Article IV Consultation highlights that the economic growth in the United Kingdom has moderated since the beginning of 2017, reflecting weakening domestic demand. The sharp depreciation of sterling following the referendum has raised consumer price inflation, squeezing household real income and consumption. Business investment has been constrained. In the medium term, growth is projected to remain at about 1.5 percent under the baseline assumption of continued progress in Brexit negotiations that lead to an understanding on a broad free trade agreement and on the transition process. The baseline outlook is subject to a number of risks, including developments with Brexit negotiations; uncertainty about the recovery of productivity growth; and the current account deficit.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper assesses the economic impact of Mexico’s structural reforms. The Mexican authorities have been implementing an ambitious structural reform agenda in a coordinated effort to lift productivity growth. The reforms have targeted a broad range of industries; dissolved state monopolies; and addressed labor market, education, and governance shortcomings. The analysis suggests that external headwinds have masked evidence that the reforms are achieving many of the intended transformations in the targeted sectors. Priority should go to reforms targeting the rule of law and attendant improvements in security and reduction of corruption. These will not only improve the business environment but are key to the success of existing reform efforts.
Mr. Lamin Y Leigh and Mr. Ali M. Mansoor


This book describes the reforms needed to move small middle-income countries in sub-Saharan Africa to advanced-economy status. The result of intense discussions with public officials in the countries covered, the book blends rigorous theory, econometrics, and practitioners' insights to come up with practical recommendations for policymakers. It spans topics from macroeconomic vulnerability and reserve adequacy to labor market institutions and financial inclusion. The book is a must-read for researchers interested in the economic issues facing developing countries in sub-Saharan Africa.

Raffaela Giordano, Mr. Sergi Lanau, Pietro Tommasino, and Petia Topalova
This paper studies the effect of public sector efficiency on firm productivity using data from more than 400,000 firms across Italy’s provinces. Exploiting the large heterogeneity in the efficiency of the public sector across Italian provinces and the intrinsic variation in the dependence of industries on the government, we find that public sector inefficiency significantly reduces the labor productivity of private sector firms. The results suggest that raising public sector efficiency could yield large economic benefits: if the efficiency in all provinces reached the frontier, output per employee for the average firm would increase by 9 percent.
International Monetary Fund
Two years ago, citizens in the Arab world—fired by their ideals and visions of a better life—ignited a social movement that inspired people around the globe. In Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen—the so-called Arab countries in transition—people embraced change, ushering in a new era. This issue of F&D looks at the difficulties of this transition, focusing on long-standing forces that shape the region’s economy and offering options for moving ahead to achieve strong, inclusive growth. • Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, maps out an agenda for modernizing and diversifying the region’s economies in “Toward Prosperity for All.” • In “Freedom and Bread Go Together,” Marwan Muasher addresses the intersection of economic progress and political change. • Vali Nasr, in a Point of View column, underscores the vital role small and medium-sized enterprises play in a successful democratic transition. Elsewhere in this issue, we look at how surging oil and gas production in the United States could shake up global energy markets; the effect of uncertainty on economic growth; and Mexico’s competitiveness rebound. F&D's People in Economics series profiles Christina Romer, former chair of the U.S. Council of Economic Advisers and an architect of the U.S. stimulus package; and the latest installment in our Back to Basics series explains how structural policies help to both stabilize and strengthen economies.
International Monetary Fund
Strengthened macroeconomic and structural policies, underpinned by improved monetary and fiscal policy frameworks, have contributed to the United Kingdom's achievements. Executive Directors commended these developments, and supported the focus of policies to encourage innovation and entrepreneurship, promote research and development, and strengthen the competition in view of the need to foster the New Economy and boost productivity growth in the rest of the economy. They agreed that the banking system is profitable and well capitalized, but stressed the need to be more vigilant.
International Monetary Fund
This Selected Issues paper analyzes the background, stages and developments, and estimation of the direct costs of Paraguay's banking crisis. The paper provides the estimates on the size and evolution of the informal sector, and examines the extent to which the national accounts capture informal activity. The study also estimates the potential output and total factor productivity by examining trends in output, investment, and population growth as well as the direction and size of fiscal impulse on its economy. The paper also provides a statistical appendix report of Paraguay.
Ms. Ratna Sahay, Mr. Jeromin Zettelmeyer, Mr. Eduardo Borensztein, and Mr. Andrew Berg
What are the relative roles of macroeconomic variables, structural policies, and initial conditions in explaining the time path of output in transition and the large observed differences in output performance across transition economies? Using a sample of 26 countries, this paper follows a general-to-specific modeling approach that allows for differential effects of policies and initial conditions on the private and state sectors and for time-dependent effects of initial conditions. While showing some fragility to model specification, the results point to the preeminence of structural reforms over both initial conditions and macroeconomic variables in explaining cross-country differences in performance and the timing of the recovery.
Mr. Pietro Garibaldi and Ms. Zuzana Brixiova
This paper studies interactions between labor market institutions and unemployment dynamics in transition economies. It presents a dynamic matching model in which state sector firms endogenously shed labor and private job creation takes time. Two main conclusions arises. First, higher unemployment benefits increase steady-state unemployment, and, during the transition, they reduce the fall in real wages and speed up closure of state enterprises. Second, higher minimum wages can theoretically speed up the elimination of state sector jobs without affecting steady-state unemployment. These results are broadly consistent with existing evidence on the dynamics of unemployment and real wages in transition economies.