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International Monetary Fund. Asia and Pacific Dept
The Hong Kong Special Administrative Region (SAR)'s healthy labor market and supportive fiscal policy helped its domestic economy's resilience, while its gross domestic product (GDP) growth was marginally slow owing to its weak external environment. Its fiscal policy has been effective in reducing output volatility and providing timely support to help counter the impact from slowing external demand. The authorities have taken appropriate macroprudential measures to help safeguard the banking system, which should continue to be fine-tuned in line with evolving risks.
International Monetary Fund
Owing to prompt policy action, the Hong Kong economy is now back on a robust growth trajectory. Inflation has rebounded, driven by higher costs for utilities. Banks have withstood the financial market volatility. Higher property prices leading to higher rents and the ongoing asset price inflation will feed into higher consumer prices. Financial stability using macroprudential tools and improving the overall fiscal position will help. Preserving the flexibility and adaptability of its economy will require a careful balancing act.
International Monetary Fund. Monetary and Capital Markets Department
Hong Kong SAR (HKSAR) is a small and open economy, and a major international financial center with extensive linkages to Mainland China. Over the past two years, Hong Kong SAR’s economy and financial sector were adversely impacted by domestic social unrest, US-China tensions, and the global COVID-19 pandemic, resulting in an unprecedented two consecutive years of negative economic growth.
International Monetary Fund
This Selected Issues paper on the Republic of Korea reviews near-term economic prospects and risks. Korea experiences solid growth with low inflation, and vulnerabilities to potential shocks appear low. With Korea aging at an almost unprecedented rate, spending on pensions, health, and long-term care could rise by as much as 11 percent of GDP over the long term, threatening fiscal sustainability. Although risks facing financial institutions appear quite manageable, the authorities have focused on risks to the highly indebted household sector.
International Monetary Fund. Monetary and Capital Markets Department
The institutional framework for Macroprudential Policies (MaPP) in the Hong Kong Special Administrative Region (the Hong Kong SAR) is well established. According to the Basic Law, the Government of the Hong Kong SAR shall on its own formulate monetary and financial policies. The Financial Secretary (FS) and the Secretary for Financial Services and the Treasury (SFST) are responsible for policies for maintaining the stability and integrity of the financial system of the Hong Kong SAR. The Hong Kong SAR has a sector-based regulatory structure and the responsibilities and tools for safeguarding financial stability are spread across the Financial Services and the Treasury Bureau (FSTB) and three regulators (namely, the Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC) and Insurance Authority (IA)). There are good and well-structured interagency coordination and consultation mechanisms, through the Council of Financial Regulators (CFR) and the Financial Stability Committee (FSC), chaired by the FS and the SFST, respectively. Broad coordination between the CFR and government agencies on taxation and housing supply-side policies has also worked well. MaPP and risk assessment are communicated to the public openly and frequently through speeches, press releases and regular publications, including the Half-Yearly Monetary and Financial Stability Report of the HKMA and the Half-yearly Review Report of the Global and Local Securities Markets of the SFC.
International Monetary Fund. Monetary and Capital Markets Department
This Financial System Stability Assessment report on Hong Kong Special Administrative Region (HKSAR) highlights that HKSAR’s financial sector is very well regulated, with the capacity to withstand a diversity of shocks. The sector, however, faces major risks, which puts a significant premium on effective liquidity management, macroprudential oversight, and microprudential supervision. The regulation and supervision framework of the financial sector is of a high caliber, and displays a high level of compliance with international standards, but there remains scope for further strengthening. Financial market infrastructures are highly sophisticated, but further enhancements are needed to fully comply with new international standards.
International Monetary Fund. European Dept.
This Selected Issues paper focuses on the housing and business cycles in the United Kingdom. The UK housing cycle is highly volatile as a result of tight housing supply constraints and fluctuations in credit conditions. Housing supply-side constraints can be alleviated through changes to the planning system and tax reforms. The new National Planning Policy Framework introduced by the government is creating the incentives for local councils to increase available land for construction. There are early signs that this change in the planning system is contributing to the recovery in housing construction. Targeted macroprudential policies could address financial stability risks stemming from the housing market. Although mortgage credit as a share of gross domestic product has been declining in the current housing recovery, there are signs that there is a build-up of financial risks: loan-to-income ratios are increasing in London and among first time buyers.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note discusses the findings and recommendations in the Financial Sector Assessment Program for the Netherlands on the macroprudential policy framework. The authorities have strengthened the institutional arrangement for macroprudential policy by enhancing the Netherlands Bank’s legal mandate and establishing the Financial Stability Committee, but there is room for improvement. The authorities’ analysis of systemic vulnerabilities is sophisticated and timely. The authorities have been using the range of macroprudential instruments at their disposal, but further tightening will be necessary to contain a potential buildup of systemic risk in the financial system.
International Monetary Fund. Western Hemisphere Dept.
This paper describes the proposed Canada Infrastructure Bank (CIB) that will be allocated Can$35 billion over an 11-year period. It will add to, and not replace, existing methods of financing public infrastructure at all levels of government, including the Federal Government’s Can$187 billion Investing in Canada plan covering 12 years. The CIB will be a wholly government-owned Crown corporation, subject to provisions of the Financial Administration Act (FAA), including the requirement to prepare a corporate plan, operating budget, and capital budget, for approval by the Government. The CIB and its investments will be on the federal government’s balance sheet. However, the infrastructure-related special purpose vehicles (SPVs) in which the CIB invests will not be on the government’s balance sheet. Attracting private capital requires offering a rate of return acceptable to the investor. Worldwide, there are trillions of dollars looking for safe returns over the long-term. The risk-adjusted rate of return sufficient to attract an investor is not known with precision ex-ante. Investors will seek the highest rate of return possible above its minimum threshold.
International Monetary Fund. Monetary and Capital Markets Department
While Norway’s institutional arrangement for macroprudential policy is uncommon, the authorities have shown strong willingness to act. The Ministry of Finance (MoF) is the sole macroprudential decision-maker in Norway, which is rare in international comparison. However, Norges Bank and the Finanstilsynet (FSA) play important advisory roles. In recent years, the authorities have taken substantive and wide-ranging macroprudential policy actions in response to growing systemic vulnerabilities—and these seem to have been effective in slowing down some of the riskier trends. The macroprudential policy toolkit is well stocked and actively used.