| Summary: | "Macroeconomic conditions deteriorated in 2012. Growth slowed to 2.7 percent from 5 percent in 2011. Both the external and fiscal deficits widened significantly, to 10 percent and 7.6 percent of GDP, respectively. The 2012 fiscal outcome entailed a significant slippage from the authorities' target and exposed vulnerabilities in the budget framework. Core inflation has remained low while the unemployment rate remained about 9 percent. The short-term outlook is improving. A bumper crop will likely push growth in 2013 above 5 percent, although nonprimary GDP growth is decelerating. Both the fiscal and external positions have been improving so far in 2013, partly reflecting lower international commodity prices. Reserves have been stable at about four months of imports for more than half a year, supported by strong capital inflows. Both indicative targets at end-April (net international reserves (NIR) and fiscal deficit) were met. The current account deficit is expected to continue contracting while the government pursues its fiscal consolidation efforts. The authorities have taken important measures to reduce fiscal and external vulnerabilities. The authorities took the 2012 fiscal slippage seriously and responded with significant actions to strengthen their fiscal framework and reduce the impact of world commodity price fluctuations on the budget. In particular, they adopted a mechanism to index the prices of most subsidized energy products to international prices, a welcome step toward the much-needed comprehensive subsidy reform. They are committed to achieving a fiscal deficit of 5.5 percent of GDP in 2013"--Abstract.
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