This volume book brings together nine background papers prepared for an evaluation by the IMF Independent Evaluation Office of “the IMF and the crises in Greece, Ireland, and Portugal.” It presents an authoritative work on the evolving relationship between the IMF and the euro area, a common currency area founded in 1999 consisting of advanced, highly integrated economies in Europe. The euro area, or any common currency area for that matter, has posed challenges to the IMF’s operational activities as its Articles of Agreement contain no provision for joint membership. The challenges became intense when a series of crises erupted in Greece, Ireland, and Portugal from 2009 to 2011, and the Fund was called upon to help intervene by offering its financing and crisis management expertise. The IMF found itself in uncharted territory where there was no precedent or established procedure. The chapters, many of which are prepared by prominent academics and former senior IMF officials who are thoroughly familiar with internal procedures, discuss various aspects of the IMF’s engagement with the euro area, including precrisis surveillance, how key decisions were made, how the IMF collaborated with European institutions, and how it designed and implemented its lending programs with the three crisis countries. The book gives prominence to governance-related issues, given the large voting share (of more than 20 percent) within the IMF of euro area members and the subsequent public perception that the IMF treated the euro area more favorably than it does developing and emerging market members. The approaches are both cross-cutting and country-based. Some chapters deal with issues related to the euro area as a whole, while others focus on how the Fund engaged with individual euro area countries. The book contains a statement on the IEO evaluation by the IMF Managing Director and a Summing Up of the Executive Board discussion held in July 2016.
Bulgaria’s potential output growth in future could be markedly lower, and it may take considerable time for the excess labor and resources to be absorbed by other sectors, in particular by the export sector. This suggests that the natural level of rate of unemployment will rise and remain higher, and the full employment level is likely to decline. There is a requirement of significant improvements in labor productivity and competitiveness, as well as reforms to further improve labor mobility and participation.
Mr. Abdul d Abiad, Mr. Ashoka Mody, Ms. Susan M Schadler, and Mr. Daniel Leigh
The central challenges facing the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia as they work to catch up to advanced European Union (EU) income levels are discussed in this new book. Focusing on the region’s growth performance, and outlining two growth scenarios that illustrate the range of investment and productivity growth rates under the income catchup objective, the authors draw upon extensive resources to identify strengths and weaknesses.
This 2001 Article IV Consultation highlights that Latvia has enjoyed a strong economic performance since the last Article IV Consultation in June 2000. Real GDP growth was 6½ percent in 2000 and accelerated to 8¾ percent in the first half of 2001; growth has been led primarily by investment. Inflation has remained low at 3 percent in 2000 and 2001. Market sentiment toward Latvia remains favorable, as evidenced by the relatively low yield spread on Latvia’s first Eurobond and by the successful issue, in November 2001, of a second Eurobond.
This 2003 Article IV Consultation highlights that the Republic of Latvia has enjoyed continued strong economic performance since the last Article IV Consultation in January 2002. Real GDP growth was 7.9 percent in 2001 and 6.1 percent in 2002; growth has been led by investment and, more recently, consumption. Real per capita GDP now stands some 50 percent above its 1995 level. Inflation remains low and was under 1½ percent in 2002. The current account deficit rose to nearly 10 percent of GDP in 2001, partly reflecting stagnant external demand and one-time factors.
With the resumption in growth, the economic recession triggered by the Russian crisis has ended. Additional efforts will be needed to reduce the current account deficit and increase its financing. The IMF staff commend the intention to streamline tax benefits granted to enterprises and to eliminate the benefits that are inconsistent with EU regulations. Financial sector development is imperative for continued external sustainability and economic growth. The government’s ability to implement the privatization program and address the remaining impediments to an enabling business climate is crucial.
The staff report for the 2005 Article IV Consultation on the Republic of Latvia highlights the economic outlook and mid-term risks. A sound policy framework and far-reaching structural reforms supported this performance, including a prudent fiscal policy that underpinned the exchange rate peg. The ongoing credit boom and faster real wage growth are expected to support private domestic demand while a sharp increase in net European Union (EU) grants would also boost public spending. Efficiently allocating EU funds for infrastructure was seen as a key element of a framework for promoting efficient resource allocation.
The Latvian economy has made remarkable strides, combining macroeconomic stability with rapid income convergence. An upfront policy tightening is needed to contain near-term overheating and secure a soft landing. Fiscal restraint is needed to counter the sizable demand stimulus already in play. Moderating credit growth is essential to relieve overheating pressures. Risks from the credit boom and delayed euro adoption reinforce the need for a strong regulatory and supervisory framework for banks. Safeguarding competitiveness while narrowing the wage gap requires scaling the technology ladder.
Latvia has rebounded from the crisis, after successfully undertaking a difficult adjustment program. The recovery has been well balanced between external and domestic demand. The labor market is improving but unemployment is still high. Past consolidation efforts have brought down the fiscal deficit. The banking system is recovering. Nonresident deposits in the banking system have been expanding rapidly. Economic growth is expected to weaken slightly in 2013, before picking up later. Euro adoption in 2014 appears within reach, subject to some technical uncertainties.
International Monetary Fund. Strategy, Policy, &, and Review Department
The IMF has approved an exceptional access Stand-By Arrangement for Latvia. The program is part of a coordinated international effort that has improved financial and economic stability. By early 2008, the fast growth has leveled off but severe vulnerabilities turned the slowdown into a crisis. Immediate steps to stabilize the financial sector and help stem reserve losses has focused on resolving the systemic Parex Bank, which is experiencing a deposit run. Measures to ensure long-term external viability has focused on fiscal and income policies.