Thursday, June 13, 2019

Swiss keep expansionary policy, launch new policy rate

       Switzerland's central bank is sticking with its expansionary monetary policy and will remain active in foreign exchange markets as necessary as "the risk of renewed upward pressure on the Swiss franc is high, given the many hotspots around the world."
      The Swiss National Bank (SNB) left its interest rate on banks' sight deposits at minus 0.75 percent but also introduced the SNB policy rate, a new benchmark rate that replaces its target range for 3-month Swiss Franc Libor and will be used by SNB to communicate its future policy decisions.
      The target for 3-month Libor has been between minus 1.25 percent and minus 0.25 percent since January 2015 when the SNB stunned financial markets by scrapping an upper limit on the Swiss franc's exchange rate to the euro.
      Libor, or the London Interbank Offered Rate, is a rate published daily in London based on the interest rates reported by leading banks.
      But in 2012 the rate - a global benchmark - became tainted after it was discovered that banks were manipulating it by falsely inflating or deflating their rates so they could profit from trades or give the impression they were more creditworthy than the were.
      "The reason for introducing the SNB policy rate is that the future of the Libor is not guaranteed," SNB said, as the UK's Financial Conduct Authority will only ensure that Libor is maintained through to the end of 2021.
      Given that SNB's inflation forecast for the next three years is based on the assumption of unchanged interest rates, the central bank is switching to the policy rate now to ensure the forecast is based on the same interest rate over the entire horizon.
      As an alternative to Libor, the Swiss financial market is beginning to use 10-year old SARON, the Swiss Average Rate Overnight, which is based on trades and binding quotes for overnight transactions, a broader and more liquid market than the unsecured money market on which Libor is based.
      The SNB raised its forecast for inflation slightly from March due to higher prices for imported goods and now sees inflation of 0.6 percent in 2019, up from 0.3 percent, and 0.7 percent in 2020, up from 0.6 percent.
      For 2021 SNB expects an inflation rate of 1.1 percent, down from 1.2 percent.
      "The situation on the foreign exchange market continues to be fragile," SNB said, with SNB governing board member Andrea Maechler, noting the escalation of the U.S-China trade dispute and concerns about Italy's budget situation had put fresh upward pressure on the franc's exchange rate, underscoring its role as a safe-haven during uncertain times.
      "The negative interest rate and the SNB's willingness to intervene in the foreign exchange market as necessary therefore remain essential," Maechler said.
      Despite mixed signs from the global economy and the risk that a sharp slowdown would quickly spread to Switzerland, SNB said economic indicators were currently favorable and it expects the economy to growth around 1.5 percent this year, the same as it forecast in March.

Sunday, June 9, 2019

UPDATE-This week in monetary policy: Armenia, Georgia, Turkey, Namibia, Switzerland, Peru & Russia

    (UPDATE - Following item has been updated with Turkey)  

    This week - June 9 through June 15 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Armenia, Georgia, Turkey, Namibia, Switzerland, Peru and Russia.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

JUN 9 - JUN 15, 2019:
COUNTRY                   DATE                     RATE                LATEST                    YTD              1 YR AGO

Saturday, June 8, 2019

Chile cuts rate 50 bps in surprise on wider output gap

     Chile's central bank surprised financial markets and investors by cutting its monetary policy rate by 50 basis points to 2.50 percent in response to lower-than-expected growth in the first quarter of this year and a wider-than-expected output gap from the impact of "massive immigration of recent years on trend and potential growth."
     The unanimous rate cut on June 7 by the Central Bank of Chile's (CBC) board surprised many economists because in its previous monetary policy decision from May 9 the central bank did not signal it was considering cutting its rate and CBC is known as transparent and predictable.
      In May CBC began a gradual shift away from its earlier tightening stance by saying it would keep its monetary stimulus in place for an extended time as inflation was sluggish and preliminary data showed first quarter growth was less than expected.
     This shift in May followed rate hikes by a total of 50 basis points in October 2018 and then in January this year when the central bank said it was gradually tightening its policy stance.
     Friday's rate cut reverses these two rate hikes, bringing the rate back to its level from May 2017 to September 2018.
     However, minutes from the board's meeting in May, released on May 27, showed the board had in fact discussed cutting the rate in a preventative and corrective action.
      The board was beginning to realize its monetary policy stance in the past had been less expansive than thought because the output gap was in fact bigger than expected due to positive impact of recent immigration on potential growth.
       Chile took in about 700,000 migrants between 2015 and 2017, many from Venezuela and Haiti. Venezuelans now comprise the largest foreign community in Chile, outnumbering Peruvians who were the largest community only two years ago.
      While some economists had taken note of the board's discussion in May, most thought this meant the central bank would keep its rate on hold for now or maybe cut it later this year after its lowered its growth forecast or the estimate for a neutral interest rate in its June monetary policy report.
      But in its policy statement, the board said the June report, which will be released on Monday, June 10, quantifies the effects of recent immigration on growth, boosting the estimate of potential growth by 25 basis points to 3.25 percent - 4.75 percent for the period 2019 to 2028 and to around 3.4 percent for 2019 to 2021.
      "This, combined with the lower growth of the first quarter, results in a widening of the activity gap," which means the neutral monetary policy rate has been revised down by 25 basis points, partly reflecting the drop in neutral rates around the world.
      The June monetary policy report suggest growth this year will be between 2.75 and 3.50 percent, below the previous forecast of 3.0 to 4.0 percent.
      For 2020 and 2021 growth is forecast between 3.0 and 4.0 percent, reflecting a recovery of growth in the second half of this year and higher potential growth.
      "The board estimates that, in light of the updating of the structural parameters, the economy has not recovered enough to close the activity gap and boost inflation," CBC said, adding"
      "Accordingly, the board has deemed it necessary to recalibrate the monetary impulse," with the new level of its policy rate enough to ensure inflation converges to the target.
      Going forward, CBC said changes to the policy rate will depend on how inflation moves toward its 3.0 percent target, with this depending on the labour market absorbs the inflow of migrants, the level of investment and external developments.
      Chile's gross domestic product slowed to lower-than-expected annual growth of 1.6 percent in the first quarter of this year from 3.6 percent in the fourth quarter of 2018, with the CBC pointing to slower growth of machinery and equipment investment, exports as a consequence of a deterioration in the external markets and a build-up of inventory that failed to reverse as it had expected.
      Headline inflation rose to 2.3 percent in May, but mainly due to higher electricity rates, with core inflation of 1.9 percent and inflation expectations for end-2019 and in 12 months below 3.0 percent.
     CBC's policy decision was released after financial markets closed on Friday, with Chile's peso so far showing little change in response to the rate cut.
      The peso was trading at 692.8 to the U.S. dollar on June 9, steady from levels seen in the second half of last week but up 2.4 percent from last Monday. Compared with the start of 2019, the peso was steady.

Friday, June 7, 2019

Azerbaijan cuts rate 8th time but inflation seen in target

    Azerbaijan's central bank cut its benchmark discount rate for the 8th time since February last year, saying the cut takes into account that inflation is below its target, inflation expectations are stable, the external environment is favorable and the latest economic outlook.
     The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by a further 25 basis points to 8.50 percent and has now lowered its by a total of 650 points since February 2018.
     It is CBA's fourth cut this year, with the rate being cut by a total of 125 points this year.
     CBA said further decisions about the interest rate will be based on the forecast for inflation, inflation expectations, the external environment and financial markets' response to this.
     Azerbaijan's inflation rate rose to 2.4 percent in April from 2.1 percent in March, but CBA said this was below its target of 3.1 percent.
      CBA forecast inflation by the end of 2019 will remain within its target range of 4.0 percent, plus/minus 2 percentage points.
     While inflation expectations are stable, CBA said agricultural prices will have a declining effect on food inflation of the next few months given seasonal changes.

Thursday, June 6, 2019

UPDATE-ECB pushes back any rate hike to H2 2020 at the earliest

     (An earlier story today about the ECB's decision has been updated with comments from ECB President Mario Draghi's press conference and ECB staff forecasts):
      The European Central Bank (ECB) kept its key interest steady but again pushed back any rate hike by another six months to the second half of 2020, at the earliest, as inflation remains far below its target and economic growth sluggish from global headwinds, and prolonged uncertainty.
      The governing council of the ECB, the central bank for the 19 member states of the European Union (EU) that use the euro currency, also decided that interest rates on its new series of loans aimed at boosting economic activity - targeted longer-term refinancing operations (TLTRO III) - would be set a 10 basis points above the average rate applied in its main refinancing operations.
     "The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to 2% over the medium term," the ECB said in a statement.
      The ECB also confirmed it would continue reinvesting payments from maturing securities that were bought under its asset purchase program, known as quantitative easing, "for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation."
      It is the second time in three months the ECB has delayed any rate hike, illustrating the speed with which the euro area economy is being dragged down by the slowing global economy.
     "Despite the somewhat better than expected data for the first quarter, the most recent information indicates that global headwinds continue to weigh on the euro area outlook," ECB President Mario Draghi said, adding:
      "The prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, is leaving its mark on economic sentiment."
      After slashing its benchmark refinancing rate to its current level of 0.0 percent and the deposit rate to minus 0.40 percent in March 2016 following the launch of asset purchases in March 2015, the euro area economy slowly improved through 2017 before decelerating during 2018.
      But the ECB remained confident the slowdown was temporary and decided in June 2018 interest rates could begin to rise in the second half of 2019. It also wrapped up its asset purchases, which have reached some 2.6 trillion, in December last year.
      By March this year it became clear the slowdown was dragging on, and the ECB pushed back the time frame for any rate hike to 2020, at the earliest, and loosened its policy stance once again by launching a new series of long-term lending programs.
      While Draghi confirmed the ECB's guidance that it "stands ready to adjust all instrument"s to ensure inflation rises in a sustainable manner, he was more pointed today, saying the council was "determined to act in case of adverse contingencies."
      Draghi said the ECB general council had become more "granular" in discussions of possible responses to the prolonged and growing risks facing the euro area economy, with several members raising the possibility of further cuts to the ECB's deposit rate while others raised the possibility of restarting the asset purchase program or further extensions in the forward guidance along with pursuing the price stability objective in a more symmetric fashion.
      With the ECB's benchmark refinancing rate already at zero percent, Draghi said fiscal policy also would have to play a fundamental role in the event of a contingency, but made it clear that he still believes the ECB has room to ease further.
     "The policy space is there and the exchanges we had today is that if adverse contingencies were to materialize, the Governing Council stands ready to act and use - as I've said many times - all the instruments that are in the toolbox," Draghi told journalists.
      In the first quarter of 2019 growth of the euro area's gross domestic product was unchanged from the fourth quarter of 2018 at 1.2 percent year-on-year, down from 2.5 percent in the first quarter of 2018.
     In an update to its growth forecasts, ECB staff revised upwards its 2019 forecast by 0.1 percentage points to 1.2 percent, but lowered the 2020 forecast by 0.2 points to 1.4 percent and by 0.1 points the 2021 forecast to 1.4 percent.
      Due to global uncertainty, the risks to the growth forecast remains tilted to the downside.
      Inflation remains well below the ECB's target, plunging to a lower-than-expected 1.2 percent in May, while the ECB's preferred measure of underlying inflation, which excludes food and energy, fell to 1.0 percent from 1.4 percent.
     After fluctuating around 2 percent from 2000 to late 2007, inflation in the euro area accelerated towards 4 percent in early 2000 and triggered a rate hike in July 2008.
     However, only 3 months later the ECB, along with other central banks such as the Federal Reserve, the Bank of England, the Bank of Canada, the Riksbank and the Swiss National Bank slashed rates in an unprecedented coordinated effort to inject life back into frozen credit markets and prevent a global depression.
     In response, inflation slowly climbed back toward the ECB's target of below, but close to 2 percent, finally topping its target in late 2018.
     But an economic slowdown and a fall in oil prices in the fourth quarter of last year quickly put an end to any price pressures and inflation tumbled to 1.4 percent in January, rose slightly to 1.5 percent in February, then eased to 1.4 percent in March before rising to 1.7 percent in April.
     ECB staff raised their forecast for 2019 inflation by 0.1 percentage points to 1.3 percent but lowered the 2020 forecast by the same amount to 1.4 percent. In 2021 inflation is seen at 1.6 percent.

India cuts rate 3rd time in 2019 as growth seen slowing

     India's central bank cut its benchmark repo rate for the third time this year and changed its monetary policy stance to accommodative from neutral to boost demand, especially investment and private consumption, while inflation remains low enough to provide scope for looser policy.
     The Reserve Bank of India (RBI) lowered its repo rate by 25 basis points to 5.75 percent and has now cut it by 75 points this year after it switched from a tightening mode in February in response to the slowdown in global growth and weak inflation.
      "A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," RBI said, adding inflation remains below its target even taking account the expected transmission of its previous two rate cuts.
     The rate cut was widely expected by investors after India's gross domestic product grew only 5.8 percent in the first quarter of 2019, or the fourth quarter of fiscal 2018-19, the third quarter in a row of decelerating annual growth rate, as exports decelerated along with fixed capital formation.
      RBI's monetary policy committee was unanimous in today's policy decision unlike in April when two of its four members had voted to maintain the rate.
     "Global economic activity has been losing pace after a somewhat improved performance in Q1:2019, reflecting further slowdown in trade and manufacturing activity," RBI said, adding:
     "Weak global demand due to escalation in trade wars may further impact India's exports and investment activity."
       RBI lowered its growth forecast for the current 2019-20 financial year, which began April 1, to 7.0 from April's forecast of 7.2 percent, with risks to the forecast evenly balanced as the stock market remains buoyant and higher financial flows to the commercial sector augured well for investments.
      India's headline inflation rate has been picking up in recent months after bottoming at 1.97 percent in January as food prices fell. 
     In April overall inflation rose to 2.92 percent and food inflation also rose to 1.1 percent, the second consecutive month of an increase after 5 months of deflation.
     However, inflation is still well below RBI's 4.0 percent target, and consumer price inflation excluding food and fuel fell to 4.5 percent in April from 5.1 percent in March, the largest monthly decline since April 2017.
     Taking into account past rate cuts and expectations of a normal monsoon, RBI forecast inflation of 3.0-3.1 percent for the first half of 2019-20, slightly up from April's forecast of 2.9-3.0 percent.
     For the second half of 2019-20, RBI forecast inflation of 3.4-3.7 percent, slightly down from its previous forecast of 3.5-3.8 percent.

Tuesday, June 4, 2019

Australia cuts rate 25 bps to boost growth, inflation

      Australia's central bank lowered its benchmark cash rate by 25 basis points to 1.25 percent, its first rate cut since August 2016, in a move widely expected following Governor Philip Lowe's statement two weeks ago that a rate cut would likely be appropriate as inflation was likely to remain below the bank's target.
      The rate cut by the Reserve Bank of Australia (RBA) puts the cash rate at a new historic low and continues the steady, but consistent lowering of interest rates since November 2011 when the rate was cut from 4.75 percent.
     "The board (of RBA) took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," RBA said, adding a lower rate would help reduce spare capacity in the economy and lower unemployment.
     The rate cut comes amid growing evidence of a slowing domestic economy, with retail sales in April posting a surprise drop of 0.1 percent from March while new home sales in April slumped 11.8 percent from March, the largest monthly decline since September 2005.
     Although RBA said the outlook for the global economy remains "reasonable," it added downside risks from trade disputes had risen and affecting investment decisions in a number of countries.
     RBA confirmed it still expects Australia's economy to expand around 2.75 percent this year and in 2020, supported by higher investment in infrastructure and a pick-up in activity in the resources sector and the outlook for household consumption, which is being affected by a decline in house prices and a long period of low income growth, remains uncertain.
     The RBA board gave little direct guidance about its next policy decision, saying only it will continue to monitor the labour market and "adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time."
     In its May monetary policy statement the RBA lowered its forecast for growth this year and in 2020 to 2.75 percent from a previous 2019 forecast of 3.0 percent, as it became evident growth in 2018 of 2.3 percent was well below earlier forecasts of 2.75 percent.
     Australia's inflation rate fell to 1.3 percent in the first quarter of this year from 1.8 percent in the last quarter of 2018, well below RBA's target of 2 - 3 percent.
     In May RBA cut its 2019 inflation forecast to 2.0 percent from a previous 2.75 percent but maintained its 2020 forecast of 2.75 percent.

Sunday, June 2, 2019

This week in monetary policy: Kazakhstan, Australia, Poland, India, Serbia, Ukraine, ECB, Azerbaijan & Chile

    This week - June 2 through June 8 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Australia, Poland, India, Serbia, Ukraine, European Central Bank, Azerbaijan and Chile.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

JUN 2 - JUN 8, 2019:
COUNTRY                   DATE                     RATE                LATEST                    YTD              1 YR AGO
EURO AREA6-Jun0.00%000.00%

Friday, May 31, 2019

Gambia maintains rate as inflation risks subside

     Gambia's central bank left its monetary policy rate steady at 12.50 percent, saying risks to domestic inflation had subsided since February while inflation expectations are well anchored, and the exchange rate of the dalasi is projected to remain broadly stable, supported by market confidence and improved supply.
     The Central Bank of The Gambia (CBG) cut its rate by 100 basis points in February due to declining inflation and to continue its support of private sector growth. It also increased the reserve maintenance period to 2 weeks to give commercial banks more flexibility in liquidity management.
     Since May 2017 the central bank has lowered its key rate by 750 basis points as inflation has steadily decelerated since almost 9 percent in January that year.
     In April Gambia's headline inflation rate rose to 6.9 percent from 6.1 percent in March due to a one-off increase in postal charges as food inflation decelerated to 6.3 percent, reflecting a stable exchange rate and moderate global food prices.
     The central bank's core measure of inflation, which strips out utility, energy and volatile food, eased to 6.0 percent in April from 6.6 percent in April 2018.
     CBG targets inflation of 5.0 percent.
      Gambia's economy rebounded strongly last year, with growth estimated of 6.5 percent compared with 4.8 percent in 2017, driven by the services sector, including tourism and trade, financial services and insurance, transport and telecommunications. Agriculture also recovered to slow 0.9 percent after shrinking 4.4 percent in 2017.
      Although delayed rain fall, flooding and long dry spells continue to affect crop yields, CBG said early data show that growth will remain robust in 2019, helped by support from its development partners, higher remittances, tourism and foreign direct investment.
      Gambia's foreign exchange market is functioning smoothly, the bank said, saying the volume of transactions had risen to US$638.5 million in the first quarter, up 25.7 percent from fourth quarter 2018.
      The dalasi's exchange rate is also broadly stable, rising against pound sterling, euro and the CFA from April 2018 to April 2019, but against the U.S. dollar is was down by 4.8 percent.

Sri Lanka cuts rates 50 bps, Easter bombs to dent growth

     Sri Lanka's central bank cut its two main interest rates by 50 basis points, as widely expected, saying economic growth this year is expected to be lower than earlier projected as the Easter Sunday attacks "have affected confidence and sentiments of economic agents, particularly disrupting tourism and related activities."
     The Central Bank of Sri Lanka (CBS) added "increased trade tensions, weakened business confidence and softened external demand" was also softening global economic growth, which has "prompted key advanced economies to become increasingly dovish, while several emerging market economies have also relaxed their monetary policy stance to support economic activity given subdued inflation pressures."
      CBS cut its Standing Deposit Facility Rate (SDFR) to 7.50 percent and the Standing Lending Facility Rate (SLFR) to 8.50 percent "to stabilize inflation at mid-single digit levels and enable the economy to reach its potential."
      It is the central bank's first change in its policy rates since it raised rates by 75 basis points in November last year to maintain a neutral policy stance as it also lowered banks' reserve requirements by 150 points to boost liquidity after all three major credit ratings agencies lowered their ratings in the wake of a political crises.
     In February this year CBS then lowered its reserve ratio by a further 100 basis points to 5.0 percent to boost a persistent deficit of liquidity in money markets and boost credit growth.
     Although CBS then maintained its rates in April, it warned its could reduce rates in the coming period if current trends in global financial markets, trade and credit growth continue as inflation expectations in Sri Lanka were well anchored.
      "These trends have continued, and in addition, the economy has been affected by the Easter Sunday attacks and its adverse spillover effects on related sectors," CBS said.
      And while growth is likely to weaken, global oil prices have remained elevated due to geopolitical uncertainty.
      Following a slight slowdown of growth in 2018 to 3.2 percent from 3.4 percent in 2017, CBS the economy was expected to have picked up speed in the first quarter of this year due to improved output from agriculture and industry-related activites.
     However, the bombings, which killed more than 250 people, have hurt Sri Lanka's tourism business, the country's third largest source of foreign currency, making it unlikely it would meet targeted growth this year of 3 - 4 percent.
     The central bank's cuts in reserve ratios and liquidity injections had helped lower call money rates by around 50 basis points so far this year, lowering yields on government bonds, and in April CBS also imposed maximum interest rates on deposits to further lower the cost of funds for financial institutions and allow then to lower lending rates and boost credit flow.
     However, CBS said market lending rates had "failed to show any sign of commensurate downward adjustment" and credit by commercial banks to the private sector had contracted on a cumulative basis in the first four months of the year.
     Earnings from tourism is expected to rebound with the support of tighter security conditions, a relaxation of travel advisories and a promotional campaign while the receipt of funds from the International Monetary Fund this month should help boost investor sentiment.
     Sri Lanka's inflation rate rose for the fourth month in a row to 4.5 percent in April and is expected to remain within the bank's target range of 4-6 percent this year and beyond.
 Despite the Easter bombings and its affect on growth, Sri Lanka's rupee has risen this year, supported by the receipt of IMF funds, and has appreciated by 3.7 percent so far against the U.S. dollar.
      Today the rupee was trading at 176.4 to the dollar.

Thursday, May 30, 2019

Fiji maintains rate but growth seen easing from 2018

     Fiji's central bank left its benchmark Overnight Policy Rate (OPR) unchanged at 0.50 percent as the economy is poised to continue expanding for the 10th consecutive year, though at a more moderate pace than in 2018, while its twin objectives of price stability and and adequate foreign reserves remain intact.
     The Reserve Bank of Fiji (RBF), which has maintained its rate since October 2011, said recent data showed a deceleration in economic activity in tandem with the slowing global economy, the government's expected fiscal consolidation and a natural slowdown in growth after 9 years of expansion.
     RBP Governor Ariff Ali said private sector credit grew by 8.3 percent in April, unchanged from March but slower than growth in the first two months, reflecting slower consumptions and investment borrowing.
     On May 10 RBF lowered its 2019 growth forecast to 2.7 percent from an earlier forecast of 3.4 percent, and down from 4.2 percent in 2018, as overall aggregated demand is expected to be modest this year on slower private sector credit and consolidation in the 2019-20 national budget.
     For 2020 and 2021 the central bank forecast broad-based growth of around 3.0 percent, with major contributions from agriculture, manufacturing, information and communication, wholesale & retail trade, and the accommodation & food services sectors.
    The next update of economic projections is in October.
    Fiji's inflation rate fell to 2.1 percent in April from 4.0 percent in March from lower prices of food and non-alcoholic beverages, utilities and transport. By year-end inflation is expected around 3.5 percent.
    Fiji's foreign reserves were comfortable at $1,931.4 million as of May 30, sufficient for 4.2 months of import cover, down from $1,932.4 million as of April 25 but up from $1,923.7 million as of March 28.
    In February the International Monetary Fund said Fiji's economy had recovered well from several natural disasters but cautioned external conditions were becoming less favorable due to low sugar prices, higher oil prices and slowing growth in its main trading partners.
     It called on Fiji's government to speed up fiscal consolidation to rebuild fiscal space and support external stability, adding monetary policy may need to be tightened to help narrow the current account deficits and preserve foreign reserves in tandem with fiscal consolidation if less favorable external conditions persist.
     The IMF forecast gross domestic product growth this year of 3.4 percent and 3.3 percent in 2020, with inflation averaging 3.5 percent this year and 3.0 percent in 2020.
     The central government's budget was seen narrowing to a deficit of 3.6 percent of GDP this year from 4.4 percent in 2018 and to 3.3 percent in 2020 while public debt was seen rising to 50.2 percent of GDP in 2019 from 49.8 percent in 2018 and then to 50.4 percent in 2020.