Preliminary data suggest that the fiscal balance registered a small surplus in FY 2013/14. This outcome was supported by a further reining in current expenditure, higher mining revenue, and a one-off increase in the Bank of
The main near-term risks relate to the uncertain external environment, such as the potential slowdown in emerging markets, which poses downside risks to mineral export demand. On the domestic front, the ongoing problems with power supply and continued high though decelerating growth in household borrowing are potential sources of vulnerabilities. A key medium-term risk relates to the sustainability of long-term growth as trend growth has softened in the last decade requiring the easing of structural bottlenecks and finding new growth drivers.
Executive Board Assessment
In concluding the 2014 Article IV consultation with
staff's appraisal, as follows:
The mid-term review (MTR) of the 10th National Development Plan (NDP10) serves as the authorities' blueprint for structural transformation. Staff welcomes the MTR of NDP 10, which reemphasizes the need to reduce the size of government relative to GDP so that the private sector can take the lead in generating economic growth.
Under current conditions the economy is broadly internally and externally balanced and the authorities' near-term macroeconomic policy stance is appropriate. Overall external stability is, however, affected by the lack of export diversification, which leaves
Staff welcomes the authorities' medium-term fiscal strategy. The emphasis on rebuilding the
Staff urges the government to articulate a clearer set of measures to reduce the wage bill relative to GDP and broaden the tax base. Despite the modest wage awards in recent years and the de facto hiring freeze, the wage bill continues to be high reflecting the impact of promotions, non-wage allowances and overtime. The authorities should avoid granting unwarranted preferential tax regimes for businesses.
The continued increase in household borrowing warrants close monitoring. Staff urges the authorities to use macro prudential tools to limit potential vulnerabilities in the financial system. Plans to establish a national credit bureau is also welcomed. Policies to enhance financial inclusion should focus on mitigating the underlying market failures in the financial system and reducing intermediation costs.
Returning to a period of strong growth would require policies to reinvigorate total factor productivity. These include improving the quality of public spending, most notably on education and the public investment program to ensure the transformation of diamond wealth into sustainable assets, reducing further the regulatory burden on firms, alleviating infrastructure bottlenecks and improving access to finance by small and medium sized enterprises.
Table omitted. Click here to view: (http://www.imf.org/external/np/sec/pr/2014/pr14340.htm)
1/ Calendar year.
2/ Refers to the growth of value added of sectors other than mining, excluding statistical adjustments. The latter includes financial intermediation services indirectly measured (FISIM), taxes on products, and subsidies.
3/ Year beginning
4/ The non-mineral primary balance is computed as the difference between non-mineral revenue and expenditure (excluding interest receipts and interest payments), divided by non-mineral GDP.
5/ Includes publicly guaranteed debt.
6/ Based on imports of goods and services for the following year.
1 (http://www.imf.org/external/np/sec/pr/2014/pr14340.htm#P20_321) Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
2 (http://www.imf.org/external/np/sec/pr/2014/pr14340.htm#P21_801) Article IV consultations are concluded without a Board meeting when the following conditions apply: (i) there are no acute or significant risks, or general policy issues requiring Board discussion; (ii) policies or circumstances are unlikely to have significant regional or global impact; (iii) in the event a parallel program review is being completed, it is also being completed on a lapse-of-time basis; and (iv) the use of Fund resources is not under discussion or anticipated.
TNS 24KuanRap-140712 30FurigayJof-4795120 30FurigayJof
Most Popular Stories
- Homeowners More Satisfied With Mortgage Servicers
- Russia, Ukraine Now Face Off Over Football Clubs
- Law Lets Users Unlock Cellphones
- Motorists Get Rare Summer Break on Gas Prices
- Body Parts Retrieved at MH17 Crash Site
- Obama Vows to Veto House Immigration Bill
- Government Meets Goal for Small-business Contracts
- Reno Gigafactory No Cinch to Land Tesla Plant
- MassMutual Teams Up With ALPFA
- Chrysler U.S. Sales in July Hit 9-Year High