The staff report for the Second Review Under the Stand-By Arrangement on the Former Yugoslav Republic (FYR) of Macedonia highlights economic developments and policies. FYR of Macedonia’s economic performance since independence has been marked by notable achievements in macroeconomic management, as well as some disappointments in the area of structural reforms. Inflation was brought down from hyperinflation levels to the low single digits by the de facto exchange rate peg, which was sustained in spite of sometimes challenging circumstances.
The macroeconomic developments in the Former Yugoslav Republic of Macedonia were positive, despite the Kosovo crisis. Executive Directors welcomed this development, stressed the need to implement prudent financial policies, and accelerate structural reforms. They emphasized the need to improve corporate governance and enterprise performance through implementation of laws on bankruptcy procedures and creditors' rights. Directors noted the need for improvements in the reliability, coverage, and timeliness of economic data, and recommended the authorities to participate in the General Data Dissemination System.
This paper discusses key findings of the First Review Under the Stand-By Arrangement for Macedonia. Macroeconomic performance of Macedonia remains strong. Through end-December 2005, the authorities met all of the program’s quantitative performance criteria. Growth has remained steady at about 4 percent. Gross reserves have risen above €1 billion, allowing interest rates on National Bank of Macedonia bills to fall since November from 10 percent to 7 percent. To complete the First Review, the authorities have committed to strong policies, including measures to correct for delays in the program’s structural reforms.
This paper discusses the Former Yugoslav Republic of Macedonia’s Second Review Under the Stand-By Arrangement and Request for Waiver of Performance Criteria and Rephasing of the Program. The 2007 fiscal deficit target increased modestly to 1 percent of GDP. Taxes were cut and budget quality improved, but there remain fiscal risks, in particular in delivering the planned reduction in transfers and subsidies. Over the medium term, the government aims to keep the fiscal deficit below 1½ percent of GDP, cutting overall government spending by 2 percent of GDP while raising public investment.
Mr. Howard Handy, Amer Bisat, Mr. Sanjeev Gupta, Mr. Benedict J. Clements, Mr. Edgardo Ruggiero, James McEuen, and David M. Cheney
Every two years, the IMF’s Executive Board reviews the principles and procedures underlying IMF surveillance over its member countries’ policies, as well as the formal 1977 Surveillance Decision. The following is a summary of the 1997 review that took place earlier this month, prepared by Robert Kuhn and Dominique Desruelle of the IMF’s Policy Development und Review Department.
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.
Dimitri G. Demekas, Mr. Johannes Herderschee, Mr. James McHugh, and Saumya Mitra
This paper focuses on overcoming the challenges of globalization. The paper highlights that globalization has the potential to make all individuals better off. However, there is no assurance that all individuals will be better off or that all changes will be positive. The studies that show that, on average, poverty declines with economic growth are encouraging. But averages hide the negative impact on individual countries and on certain groups. In addition, there are important questions about the relationships between economic policies and outcomes, especially the impact of macroeconomic and structural reform policies on poverty.
Goodall Gondwe, Mr. Yusuke Horiguchi, Mr. Michael Deppler, Mr. John C. Odling-Smee, Paul Chabrier, and Mr. Claudio M. Loser
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