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Ding Ding, Fabio Di Vittorio, Ana Lariau, and Yue Zhou
Over the last decade China’s investment in Latin America and the Caribbean (LAC) has increased substantially in volume and become more diversified from natural resources to other industries. Using cross-border mergers and acquisitions data, we demonstrate that since mid-2010s China’s overseas investment has tilted toward sectors where China has a comparative advantage in the global markets, a trend similar to that of other major foreign direct investment (FDI) source countries. Moreover, China’s rising overseas investment can be linked to the rebalancing of Chinese economy, and LAC stands to benefit from its complementarity vis-à-vis China in sectors where the rising Chinese overseas investment can be met with LAC’s own investment gaps. The COVID-19 pandemic could have a long-lasting impact on global value chains and FDI flows, which poses both challenges and opportunities to LAC in attracting FDI, including from China, to support the region’s long-run economic development.
International Monetary Fund. Western Hemisphere Dept.
This paper discusses Honduras’s 2019 Article IV Consultation and Request for a Stand-By Arrangement and an Arrangement Under the Standby Credit Facility. Supported by a Fund program that expired in December 2017, Honduras has reduced macroeconomic imbalances, institutionalized fiscal prudence, and laid the groundwork for a modern monetary policy framework. The authorities are committed to maintain prudent policies and to build on previous achievements to make progress in solving long-standing issues. The authorities’ economic program aims at maintaining macroeconomic stability, while enacting economic and institutional reforms to foster inclusive growth. Honduras needs to foster inclusive growth through reforms and better governance. Policy priorities include: reforms to increase the quality of fiscal policy, sustaining revenue mobilization efforts, protecting investment and social spending, and securing financial sustainability of the public electricity company; and reforms to enhance transparency and governance in the budget.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper looks at revenue mobilization efforts in Honduras. The country has made considerable progress over the last years, helping to stabilize its fiscal position. Although tax revenue collection ratios in Honduras are high, the statutory rates are aligned with regional peers. A formal benchmarking exercise supports the evidence pointing to Honduras’s relatively good collection performance. The authorities’ future revenue mobilization strategy should prioritize reforms aiming at increasing efficiency and compliance. The cost-benefit assessment of existing tax exemptions in terms of their policy objectives may offer guiding principles to prioritize reforms going forward. Compared to peers, statutory tax rates are similar and tax collection ratios are generally higher—a benchmarking exercise suggests that the current revenue envelope is close to its frontier. Going forward, there is a need to sustain revenue mobilization efforts, which will be instrumental to maintaining a sound fiscal position, reducing the infrastructure gap, and increasing social spending. Rationalizing large tax expenditures could contribute to these efforts.
Sandile Hlatshwayo and Mr. Magnus Saxegaard
In recent years, the link between the real effective exchange rate (REER) and exports in South Africa has weakened. While exports still rise in response to REER depreciations, the REER-export elasticity is below historical estimates. The literature has put forward a number of possible explanations, from multi-national supply-chains to muted exchange rate pass-through. This research explores the role of policy uncertainty in reducing the responsiveness of exports to relative price changes. We construct a novel “news chatter” measure of policy uncertainty and examine how it, paired with other supply-side constraints, can improve our understanding of export performance. We find that increased policy uncertainty diminishes the responsiveness of exports to the REER and has short and long-run level effects on export performance. Finally, we show that a measure of competitiveness that adjusts for uncertainty and supply-side constraints greatly outperforms the REER in tracking exports performance.
Rahul Anand, Mr. Roberto Perrelli, and Boyang Zhang
Despite a substantial and prolonged exchange rate depreciation, South Africa’s export performance has disappointed since the global financial crisis. In this paper we focus on the role of structural factors in reducing the responsiveness of South African exports to the real exchange rate depreciation. To this end, we construct a unique database of export performance at the firm level. Our analysis suggests that electricity bottlenecks, limited product market competition, and labor market constraints have reduced the responsiveness of firms’ exports to the rand depreciation. On the other hand, a firm’s ability to diversify its exports has helped it benefit more from currency movements.
International Monetary Fund
This Selected Issues paper for the former Yugoslav Republic of Macedonia is examined. Real GDP growth accelerated to 5 percent in 2007 and 6 percent in the first half of 2008, from its historical average of about 3 percent. Increased investment, partly financed by FDI, is the main driver boosting domestic demand, as seen in the fast-growing import of investment and intermediate goods. Simultaneously, the current account deficit has widened substantially since 2007 and has become a major concern for macroeconomic stability.
International Monetary Fund. African Dept.


The region's prospects continue to be promising, but global developments pose increased risks to the outlook. Growth in sub-Saharan Africa should again average about 6½ percent in 2008 with oil exporters leading the way; meanwhile, growth in oil importers is expected to taper off, though only modestly. With food and energy prices still rising, inflation is projected to average about 8½ percent this year for countries in the region, setting aside Zimbabwe. Risks in 2008 are tilted to the downside, but the region is better placed today to withstand a worsening of the global environment.

International Monetary Fund
The main challenges for this review were to further redress long-running problems in the energy sector and to balance fiscal policy requirements for development spending with macroeconomic stability. The financial position of the state-owned electricity company (KESH) deteriorated significantly more than anticipated. The authorities have adopted a two-pronged solution to the electricity crisis. The authorities are prioritizing the strengthening of regulation to assure financial stability in a rapidly maturing financial system. The proposed conditionality for the Fifth Review is consistent with program goals, and the program is fully financed.
International Monetary Fund
Against the backdrop of a serious deterioration in its terms of trade and a large reversal of private capital flows following the Russian crisis in August 1998, the Tajik economy has entered a period of adjustment. Output growth has slowed down, inflation has flared up, and the exchange rate has weakened. More recently, macroeconomic stability has restored as the authorities have embarked on a strong adjustment path in response to adverse external developments and to correct the slippages in policy implementation during 1999.