2017年-IMF国际货币组织全球_Republic_of_Latvia_2017_Article_IV_Consultation_52页_989kb

2017 Article IV Consultation with the Republic of Latvia Summary

Core Content

The 2017 Article IV consultation with the Republic of Latvia by the IMF assessed the country's economic performance, outlook, and policy challenges. The consultation concluded that Latvia's growth had slowed since the crisis but showed signs of recovery, with the potential for medium-term growth to be lower than previously expected. The staff report was completed on June 20, 2017, following discussions with Latvian officials from May 18 to May 31, 2017.

Main Economic Developments

• Growth:

  • Latvia's growth eased to 2 percent in 2016 due to lower EU fund absorption and net export drag.
  • Growth accelerated in Q1 2017 to 4.0 percent year-on-year, driven by strong consumption, exports, and investment recovery.
  • Growth is projected to rise to 3.2 percent in 2017, supported by faster EU fund disbursement and continued private credit growth.

• Current Account:

  • The current account recorded a surplus of 1.5 percent in 2016, due to a 4.7 percent improvement in terms of trade, largely from falling energy prices.
  • The current account is expected to return to deficit in 2017, and widen in the medium term.

• Inflation:

  • Inflation remained low in 2016 (0.1 percent), but rose quickly in early 2017 to 3.3 percent in April, driven by energy price increases and strong base effects.
  • Headline HICP inflation is projected to rise to 3 percent in 2017, while core inflation is expected to increase moderately to 2 percent.

• Fiscal Balance:

  • The general government structural balance recorded a surplus of 0.2 percent of GDP in 2016.
  • The general government basic deficit narrowed to -0.4 percent of GDP in 2016, improving from -0.9 percent in 2015.
  • Total revenues overperformed, while expenditures were under executed, especially due to lower EU fund disbursement and other current spending.

• Credit Growth:

  • Credit to the non-financial private sector grew by 2.3 percent year-on-year in March 2017.
  • Corporate credit growth was 5.1 percent, while household credit growth was -1.1 percent.
  • The quality of the loan portfolio improved, with the share of loans past due over 90 days declining to 4.9 and 2.9 percent for households and corporates respectively.

Main Policy Views

• Potential Growth:

  • Potential growth is expected to be lower than previously thought, at around 3 percent in the medium term, due to slow TFP growth, low investment, and demographic challenges.
  • Staff simulations suggest that a 1 percentage point decrease in potential growth could delay income convergence with the EU-15 by about 12 years.

• Fiscal Policy:

  • Fiscal policy should remain neutral over the medium term to avoid procyclical risks.
  • Authorities need to efficiently use EU investment funds and allocate them to growth-enhancing projects.
  • Revenue share must be increased to compensate for future loss of EU funds and support stronger social safety nets.

• Tax Reform:

  • The tax reform initiative is welcomed.
  • The reform should support growth, improve equity, and increase revenues.
  • The fiscal impact of the reform should be carefully assessed to maintain macroeconomic stability and competitiveness.

• Shadow Economy:

  • Efforts to reduce the shadow economy are important for improving the tax system and productivity.
  • Reforms that enhance the business environment, reduce administrative burdens, and improve transparency will help formalize the economy and support growth.

• Financial Sector:

  • The financial system remains well capitalized, liquid, and profitable.
  • Credit growth is resuming, but still constrained.
  • Continued implementation of insolvency reforms and SME access to credit programs are needed.
  • Vigilant supervision and enforcement of AML/CFT measures are essential for financial stability.

Key Challenges

• Short-term:

  • Efficient absorption and use of EU funds.
  • Implementing tax reforms to support growth and equity.
  • Maintaining competitiveness and managing inflation risks.

• Medium-term:

  • Sustained credit growth to support private investment.
  • Structural reforms to improve productivity and TFP.
  • Addressing demographic and regional challenges.
  • Increasing investment and reducing the shadow economy.

Risks to the Outlook

• Inflation:

  • A sustained rise in inflation could challenge monetary policy.
  • Risks are tilted to the downside, but less than before.

• Growth:

  • Slower-than-expected EU fund absorption or credit stagnation could hinder domestic demand and growth.
  • Failure to implement structural reforms could slow productivity growth and competitiveness.

• External:

  • The external position is currently stronger than medium-term fundamentals suggest.
  • A widening current account deficit and potential loss of competitiveness remain concerns.

Summary of Key Indicators

Main Conclusions

• Latvia has made progress since the crisis, but growth has slowed.
• The financial system remains stable, and credit growth is resuming.
• Structural reforms are essential to raise potential growth and address crisis legacies.
• Fiscal policy should be neutral over the medium term to avoid procyclical risks.
• Tax reform and reducing the shadow economy are important for long-term growth and equity.