Selected Issues Papers

IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries.

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February 5, 2024

Policies to Address Climate Change: Ukraine

Description: While the near-term priorities are national defense and macroeconomic stabilization, gradually incorporating climate change considerations into policy design will become increasingly important after the war and into the long term. As regards climate change adaptation, investments will need to be made with a view to maintain long-term debt sustainability. Policy reforms will also be needed to move to a low-emissions economy to deliver international commitments and achieve the broader objective of European Union accession. Potential exists to deliver on climate priorities alongside implementing recovery and reconstruction efforts, while maintaining macroeconomic stability, and ensuring social protection and equity.


December 19, 2023

The Fiscal Cost of Aging in Belgium: Pensions and Healthcare

Description: Belgium faces a fiscal consolidation challenge at a time when the fiscal cost of aging—primarily related to pension and health outlays—is mounting. Pension spending will increase relatively fast unless a combination of measures related to pension generosity and retirement eligibility are put in place. Potential efficiency gains are large in the health sector and could absorb part of the fiscal and reorganization costs related to an aging population.

December 19, 2023

Fiscal Consolidation in Belgium: How Much and by What Means?

Description: Belgium is facing higher structural deficits and rising debt after the pandemic and energy crisis. Fiscal consolidation is needed to lower inflation, rebuild buffers, reduce debt, and preserve Belgium’s social contract. While designing an appropriate fiscal consolidation path involves trade-offs, an ideally front-loaded and significant adjustment to achieve a medium-term structural balance would reduce public debt towards the 60 percent debt threshold, significantly reducing vulnerabilities. Experiences in other countries and in the past in Belgium show that while ambitious, such an adjustment is achievable. Comparisons with peers show that rationalizing and increasing the efficiency of social benefits and the public wage bill would need to be at the core of the consolidation effort. All federal entities should share the burden of the adjustment, in a coordinated manner, with accountability at all levels of government, and within a credible and clear multi-year consolidation plan. Comprehensive spending reviews would help target budgetary saving. To mitigate the growth impact in the near term and boost potential growth, public investment should be preserved, and the adjustment should go together with structural reforms to increase labor force participation and productivity.

December 13, 2023

Making Romania Fit and Resilient for the Net-Zero Transition

Description: Romania is on track to become ‘fit for 55’—reducing its absolute emissions by 55 percent (relative to 1990) by 2030, consistent with the European Green Deal. However, becoming carbon-neutral by 2050 in an economically resilient and competitive manner would require an accelerated decarbonization path, especially in the transport and building sectors—two emission-intensive sectors that are projected to raise Romania’s carbon footprint over time. The analysis presented in this paper shows that complementing the existing decarbonization measures with further national carbon pricing instruments in these sectors could put Romania on track to carbon neutrality. Crucially, these complementary measures would incentivize green private investment and boost energy security, while enhancing Romania’s resilience and unlocking its potential in the global green value chains.

December 13, 2023

Labor Force Participation in Romania

Description: Labor force particiaption (LFP) in Romania is—at 66.8 percent in 2022—significantly lower than the EU average, especially among women and less educated people. With a declining working-age population, rasing LFP could yield signifcant benefits including by boosting long-term growth, mitigating the fiscal impact of an ageing society, and reducing inequality. Key policies to boost LFP include provision of affordabel high-quality childcare, and improving education standards.

August 11, 2023

Unlocking Tourism Potential for Sustainable and Inclusive Growth in Dominica

Description: Tourism is an important driver of Dominica’s economy. The damage of the pandemic on Dominica’s tourism sector was severer than in most regional peers, and the recovery has also been much slower, mostly due to the timing of lockdown restrictions. This paper reviews the tourism sector landscape in Dominica, assesses its recent performance relative to peers, and analyzes the main determinants and constraints for tourism development. Our econometric analysis shows that flight connectivity and demand variables play the most significant role in explaining tourism developments, while natural disasters can have negative lasting significant impacts. This calls for improving infrastructure and enhancing resilience.

July 24, 2023

Borrower-Based Macroprudential Instruments in Germany

Description: Germany’s macroprudential policy toolkit is well-developed, but its key missing piece is a set of instruments related to a borrower’s income. In addition, existing powers to adopt LTV limits have not yet been deployed. Against this background, this paper advances the discussion of borrower-based macroprudential policy in Germany by explaining how borrower-based measures could strengthen financial stability, macroeconomic stability, and consumer protection; explaining how potential concerns about these instruments could be addressed; offering approaches to initial calibrations of instruments for further analysis; and hinting at their likely effects based on other countries’ experiences. The paper also uses a microsimulation model to show that activating borrower-based measures could provide as much capital to the banking system as the capital buffer requirements that were activated in 2022.

July 24, 2023

Impact of High Energy Prices on Germany’s Potential Output

Description: The surge in energy prices since Russia’s invasion of Ukraine has reduced the energy-intensive sector’s production in Germany, although the non-energy intensive sector’s production has held up thanks in part to firms’ efforts to improve energy efficiency. Energy prices are expected to remain elevated in the foreseeable future, compared to pre-war levels, adversely affecting firms’ productivity and thus lowering Germany’s potential output. Economic modeling suggests that this effect could be around 1¼ percent of GDP in staff’s baseline, with some uncertainty around this estimate, depending on the ultimate magnitude of the energy price shock and the degree to which increased energy efficiency can mitigate it. Policies can promote effective adjustment to the shock by increasing productivity and maintaining strong price incentives to conserve energy and invest in renewable energy production.

July 19, 2023

Wage and Inflation Dynamics in Denmark

Description: Nominal wage growth in Denmark has so far been modest and outpaced by high inflation, putting real wage growth in negative territory. Amid still-tight labor markets, this has raised concerns about wage pressures going forward and the eventual impact on inflation. The analysis suggests that wage formation in Denmark has historically been partly backward-looking, and economic slack also has played a role. Given these, high inflation realized thus far and the tightness in the labor market implies that wage pressures are expected to remain elevated in the near term. Some of these wage pressures, in turn, are expected to be passed on to core inflation, sustaining high inflation. Thus, determined policies to fight inflation are important.

July 19, 2023

Cancellation of Public Holiday in Denmark

Description: Denmark cancelled a public holiday to increase labor supply, GDP, and fiscal revenues. This chapter discusses the expected labor supply impact of this change and compares it to alternative options for increasing labor supply.

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