The current account remains a weak point
Overview:
Having finally returned to growth, the economy is recovering faster than expected. Strong implementation of the IMF program has helped to rebuild FX reserves to reasonable levels and a weakening of the currency last summer was halted by tightening monetary policy. Yet, significant challenges remain. The current account deficit may have halved from its peak but still remains too high for comfort. Inflation has picked up sharply. The former means that the central bank will have to retain exchange rate flexibility in the face of any further external shocks or blows to confidence. The latter means the central bank must hike rates further. Fiscal consolidation will help in both cases and will also stabilise the public debt to GDP ratio. Political noise both internally and externally has fallen somewhat of late.