Author/Editor:

International Monetary Fund. Monetary and Capital Markets Department

Publication Date:

February 6, 2019

Electronic Access:

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Summary:

Following several years of very strong growth, the economy is expected to slow to a more sustainable pace. Near-term growth is expected to slow to a still robust 3 to 3½ percent in 2019–20, with low unemployment. The banking system in the aggregate shows resilience to adverse shocks, although some medium-sized banks appear weak. Stress tests suggest in an adverse scenario, the solvency ratio for the system of commercial banks (common equity tier one (CET1)) declines from 16 to 13 percent of risk-weighted assets, driven by loan loss provisions, valuation losses on debt securities, and funding and interest rate risks. Some medium-sized banks would come under solvency pressure with a small recapitalization need of around 0.5 percent of GDP. Banks appear resilient to short-term liquidity risks in local currency, with limited domestic and cross-border contagion risks except for cooperatives that are exposed to their network affiliating bank. Cooperative banks are also exposed to credit and concentration risks.