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International Monetary Fund. Asia and Pacific Dept
This staff report on People’s Republic of China 2013 Article IV Consultation highlights macroeconomic developments and outlook. China has maintained robust growth since the global crisis, but the heavy reliance on credit and investment to sustain activity is raising vulnerabilities. The consequence is a steady build-up of leverage that is eroding the strength of the financial sector, local government, and corporate balance sheets. This is most apparent in the continued rapid expansion in total social financing. The development of nontraditional finance marks a shift to more market-based intermediation, and the migration of activity to less-regulated parts of the system poses risks to financial stability.
International Monetary Fund. Asia and Pacific Dept

price inflation rate continued to stay in the negative territory, reflecting stable international commodity prices and overcapacity in certain industries. While inflation has stayed subdued, my authorities are vigilant to the price pressures stemming from agricultural products and rentals, as well as from resource pricing reform. Thus, my authorities will continue to guide inflation expectations so as to stabilize CPI inflation in 2014 at a rate of around 3.5 percent. Fiscal policy My authorities maintain a proactive fiscal policy stance in order to promote

International Monetary Fund. Asia and Pacific Dept

in 2012, the CPI inflation rate dropped to 2.4 percent on a year-on-year basis in the first half of this year, mainly due to the moderation in food price inflation. Meanwhile, the producer price inflation rate dropped further to -2.2 percent on a year-on-year basis in the first half of this year, from -1.7 percent in 2012, as global commodity prices remained largely contained during the period. Notwithstanding the subdued inflationary pressures, my authorities remain highly vigilant to potential challenges to price stability, in view of the upward pressures on

International Monetary Fund. Asia and Pacific Dept

. In particular, the y-o-y CPI inflation rate moderated to 1.3 percent in the first half of this year from 2.0 percent in 2014, while the y-o-y producer price inflation rate dropped to -4.6 percent from -1.9 percent over the same period. With all that said, my authorities agree with staff that the risk of deflation in China has been contained, given the firm core price and labor cost pressures, and the ample policy space to guard against the risk. My authorities will endeavor to foster new growth engines and upgrade traditional ones, including through building up

International Monetary Fund

inflationary pressures remain muted, with core and producer price inflation rates below 3 percent. After a recent decision to postpone the increase in the still regulated retail prices of electricity, the program target of 4.5 percent at year-end seems achievable. Second-quarter balance of payments data showed a larger than programmed current account deficit, mainly as a result of profit taking by foreign-owned companies, most of which was immediately reinvested. However, current account indicators for the third quarter are positive. The merchandise trade balance

International Monetary Fund
The Croatian authorities are likely to either meet or exceed the original growth, inflation, and international reserves objectives under the Stand-By Arrangement. Executive Directors commended the program, and stressed the need to maintain fiscal sustainability, and reduce public wages and employment from unsustainable levels. They welcomed the Croatian National Bank for pursing price stability, and emphasized the need to maintain fiscal and monetary policies, and accelerate structural reforms. Directors agreed that Croatia has successfully completed the first review under the Stand-By Arrangement.
International Monetary Fund

trade continues to be very limited, mainly because of the difficulties with contract enforcement. C. Price Developments 25. During early 1997 and the first half of 1998, the Ukrainian economy made significant progress in reducing inflation. Consumer and producer price inflation rates were reduced to single digits, mainly due to a monetary policy that aimed at keeping the exchange rate stable. The ensuing devaluation of the hryvnia in early September 1998 rekindled inflationary pressures, but the initial passthrough into prices appears to have been modest

International Monetary Fund. Asia and Pacific Dept
KEY ISSUES Context. After three decades of remarkable growth, the economy has been slowing. Much of the slowdown has been structural, reflecting the natural convergence process and waning dividends from past reforms; weak global growth has also contributed. Moreover, since the global financial crisis, growth has relied too much on investment and credit, which is not sustainable and has created rising vulnerabilities. Growth was 7.7 percent in 2013, and is expected to slow to around 7½ percent this year and decline further over the medium term. Focus. The pattern of growth since the global financial crisis is not sustainable and has resulted in rising vulnerabilities. The discussions focused on assessing the risks posed by the continued build-up of vulnerabilities; reforms to unleash new, sustainable engines of growth and reduce vulnerabilities; and how to best manage aggregate demand in this context, as growth is slowing yet risks are still rising. A key takeaway is that to secure a safer development path, accommodative policies need to be carefully unwound, accompanied by decisive implementation of the announced reform agenda to promote rebalancing. The result will be somewhat slower but safer growth in the near term, with the significant long-run benefit of securing more inclusive, environment-friendly, and sustainable growth. Risks. Credit and ‘shadow banking,’ local government finances, and the corporate sector— particularly real estate—are the key, and interlinked, areas of rising vulnerability. In the near term, the risk of a hard landing is still considered low as the government has the capacity to combat potential shocks. However, without a change in the pattern of growth, the hard-landing risk continues to rise and is assessed to be medium-likely over the medium term. Reform agenda. The authorities have announced a comprehensive and ambitious blueprint of reforms. Successful implementation should achieve the desired transformation of the economy, but will also be challenging. Demand management. Reining in credit growth, local government borrowing, and investment will address the risks, but also slow growth. Macro support should be calibrated to allow needed adjustments to take place, while preventing growth from slowing too much. Scenarios and spillovers. With faster adjustment and reform implementation, growth will be somewhat lower in the near term, with moderate spillovers for trading partners. However, in the medium term, income and consumption will both be higher—a result that is good for China and good for the global economy.
International Monetary Fund. Asia and Pacific Dept
This 2015 Article IV Consultation highlights that China is transitioning to a new normal, with slower-yet-safer, more sustainable growth. Growth in 2014 fell to 7.4 percent and, in 2015, is forecast to slow further to 6.8 percent on the back of slower investment, especially in real estate. The labor market has remained resilient despite slower growth, as the economy pivots toward the more labor-intensive service sector. Considerable progress has been made in external rebalancing. The current account surplus fell to 2.1 percent in 2014 from the peak of about 10 percent in 2007, and the renminbi has appreciated by about 10 percent since 2014 in real effective terms. Further progress has also been made on domestic rebalancing.
International Monetary Fund
This paper reviews economic developments in Ukraine during 1996–99. Output decline continued in 1997 and 1998, especially following the August 1998 crisis in Russia. During this period, Ukraine made substantial progress in reducing inflation, mainly through the implementation of a monetary policy that aimed at keeping the exchange rate broadly stable. However, the fiscal situation remained difficult, despite a sizable adjustment in 1998. Throughout the period, economic policy was influenced by developments in international capital markets.