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International Monetary Fund. European Dept.
Sweden entered the pandemic with substantial buffers and suffered a relatively shallow recession in 2020. The decline in output was moderated by substantial income and liquidity support as well as structural features of the economy. Sweden’s initial less stringent containment strategy seems to have altered the timing of the economic fallout, which intensified towards the middle of the year. This fallout has particularly impacted the youth and foreign-born. Economic recovery is projected over the next two years, but uncertainty has increased due to the new strains of the virus and slow vaccination.
International Monetary Fund. Western Hemisphere Dept.
This 2018 Article IV Consultation highlights that after three years of robust expansion, the economy of the Dominican Republic moderated to close to its potential level. Economic activity is estimated to have expanded by 4.6 percent in 2017, following above-potential growth of 7.1 percent on average during 2014–16. The growth moderation was concentrated in the first three quarters of 2017. The economic outlook remains positive. The monetary easing in mid-2017 is expected to support a continued recovery in economic activity in 2018. Lower lending rates and stronger credit growth following the easing, combined with higher real wages and employment, are expected to continue to support domestic demand.
Samba Mbaye, Ms. Marialuz Moreno Badia, and Kyungla Chae
This paper documents a form of private sector bailout that is much more common (and yet unnoticed) than the typical bank bailout. Building on the newly-created Global Debt Database, we show that excess private debt systematically turns into higher public debt, regardless of whether the credit boom resulted in a crisis or a more orderly deleveraging process. This debt migration operates mainly through growth rather than explicit bailouts: private deleveraging weighs on activity, prompting a countercyclical government response to support economic activity. Ultimately, whether this debt substitution results in a net increase or a net decline of overall indebtedness in the economy depends on the extent of the growth slowdown during the deleveraging spell. These findings suggest that markets and policymakers should move away from looking at private and sovereign debt in silos and pay closer attention to the total stock of debt in the economy, as the line between the two tends to become blurry.