ERPD Matrix Report - December 2014

Disclaimer: This material was produced by the ASEAN+3 Macroeconomic Research Office (AMRO) solely for the use of the parties to the Articles of Agreement is respect of AMRO (AMRO Articles of Agreement). No part of this material may be reproduced in any form for publication or disclosed to third parties unless so permitted under the AMRO Articles of Agreement. As some data in this document are provided by national authorities in strict confidence, quotation or replication to the public is not appropriate.

ERPD (Economic Review and Policy Dialogue) Matrix Report to the ASEAN+3 Deputies

The ASEAN+3 Macroeconomic Research Office (AMRO)December 2014

* This document contains information with respect to the Arrangement Request for the CMIM Precautionary Line (CMIM-PL) pursuant to Article 7 of the CMIM Agreement. The data in this document have been confirmed by respective ASEAN+3 Authorities as of November 27, 2014.

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Table of Contents

The First Set of Indicators of ERPD Matrix 31. Brunei Darussalam4 2. Cambodia123. China18 4. Hong Kong, China24 5. Indonesia30 6. Japan357. Korea 418. Lao PDR47 9. Malaysia53 10. Myanmar 5911. The Philippines66 12. Singapore72 13. Thailand 7814. Vietnam 84

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The First Set of Indicators of ERPD (Economic Review and Policy Dialogue) Matrix(Endorsed at the AFCDM+3 meeting in Nay Pyi Taw, Myanmar, April 2014)

1. External Position and Market Access

(1) Gross External Debt ( % of GDP)

(2) Gross Short-term External Debt (% of Foreign Reserves)

(3) Current Account Balance (% of GDP)

(4) Foreign Reserves (in months of imports)

2. Fiscal Policy

(1) Revenue (% of GDP)

(2) Expenditure (% of GDP)

(3) Primary Balance (% of GDP)

(4) Overall Balance (% of GDP)

(5) Central Government Debt (% of GDP)

3. Monetary Policy

(1) Monetary Policy Framework and Recent Policy Responses

(2) Headline Inflation (%, year-on-year)

(3) Core Inflation (%, year-on-year, optional)

(4) Money Growth (%, year-on-year)

(5) Credit Growth (%, year-on-year)

4. Financial Sector Soundness and Supervision

(1) Regulatory Capital to Risk-weighted Assets (%)

(2) Non-Performing Loans (NPL) to Capital (%)

(3) Non-Performing Loans (NPL) to Total Gross Loans (%)

(4) Return on Assets (ROA, %)

(5) Loan to Deposit Ratio (LTD, %)

(6) Residential Real Estate Loans to Total Banking System Loans (%, optional)

5. Data Adequacy

(1) Primary Evaluation Based on ERPD Matrices

(2) Secondary Evaluation Based on AMRO Economic Reports

BRUNEI DARUSSALAM

TABLE 1: EXTERNAL POSITION AND MARKET ACCESS

Indicators20072008200920102011201220131Q142Q143Q144Q142014

Gross External Debt (% of GDP) 1/0.00.00.00.00.00.00.00.00.0

Gross Short-term External Debt (% of Foreign Reserves) 2/0.00.00.00.00.00.00.00.00.0

Current Account Balance (% of GDP) 3/47.847.935.540.139.437.623.4N/AN/A

Foreign Reserves (in months of imports) 4/3.83.56.87.28.011.111.2N/AN/A

Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities).2/ Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/ Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/ Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).

Sources: National authorities.

TABLE 2: FISCAL POLICY IndicatorsFY07/08FY08/09FY09/10FY10/11FY11/12FY12/13FY13/14FY14/15

Revenue (% of GDP) 1/52.060.339.451.960.655.546.7

Expenditure (% of GDP) 2/31.231.640.935.933.635.337.4

Overall Balance (% of GDP) 3/20.828.6-1.515.926.920.29.3

Primary Balance (% of GDP) 4/N/AN/AN/AN/AN/AN/AN/A

Central Government Debt (% of GDP) 5/0.00.00.00.00.00.00.0

Notes: Fiscal year starts with April and ends in March in the following year. 1/ Revenue = Tax + Non-Tax Revenue.2/ Expenditure = Current Expenditure + Capital Expenditure.3/ Overall Balance = Revenue Expenditure.4/ Primary Balance = Overall Balance + Debt Service.5/ Central Government Debt = Domestic Central Government Debt + Foreign Central Government Debt.


TABLE 3: MONETARY POLICY

Indicators20072008200920102011201220131Q142Q143Q144Q142014

Monetary Policy FrameworkPlease see the following page (Table 4)

Headline Inflation (%, year-on-year) 1/1.02.11.0-0.10.10.4-0.30.1

Core Inflation (%, year-on-year, optional) 2/ N/AN/AN/AN/AN/AN/AN/AN/AN/A

Money Growth (%, year-on-year) 3/6.79.69.74.810.10.91.52.07.1

Credit Growth (%, year-on-year) 4/4.0-2.4-2.3-2.7-1.62.18.1-2.4-1.5

Notes:1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. 3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. 4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year.


TABLE 4: MONETARY POLICY FRAMEWORK AND RECENT POLICY RESPONSES

Monetary Policy Framework

Objective The main objectives of AMBD are as follows: a) To achieve and maintain domestic price stability; b) To ensure the stability of the financial system, in particular by formulating financial regulation and prudential standards; c) To assist in the establishment and functioning of an efficient payment and settlement systems and to oversee them; and d) To foster and develop a sound and progressive financial services sector.

Regime The nations monetary discipline of having a currency board system has ensured the full convertibility of base money with the exchange rate pegged at par to the Singapore Dollar. Following the establishment of the AMBD, the Currency Interchangeability Agreement between the Government of Negara Brunei Darussalam and the Government of the Republic of Singapore remains intact. Under this agreement, the Singapore Dollar is customary tender in Brunei and vice-versa.

Instruments Given that Brunei operates a currency-board-based monetary policy, its main role is the issuance and management of Brunei currency notes and coins to banks in the domestic financial system. It also administers the printing of Brunei currency notes and in-house minting of coins

Decision-Making Process Information on monetary and financial policies and statistics are available on AMBDs website at www.ambd.gov.bn. AMBD also issues directives and notices to financial institutions, where necessary.

Major Monetary Policy Decisions and Updates

No major monetary policy decisions.Other updates:(a) Capital Market SupervisionIn the area of capital market supervision, AMBD issued two notices which took effect on 22nd August 2014.

The first notice (CMS/1/2014) is on exemption from public offering registration requirement and applies to holders of Capital Markets Services Licences under the Securities Markets Order, 2013 (SMO) and any persons granted exemptions to conduct regulated activities pursuant to the repealed Securities Order, 2001. Under the repealed Securities Order, 2001, securities as defined under the SMO, with the exception of collective investment schemes, were not subject to any licensing or registration requirement and persons offering such securities were only required to furnish the Authority with a notification of the offering. However, with the commencement of the SMO, any securities that do not fall within the meaning of exempt securities and transactions under section 117 of the SMO and that are offered by way of a public offering are required to file with the Authority, a dated registration statement and form of prospectus, pursuant to section 116 of the SMO. The notice exempts any securities offered before the commencement date of the SMO from the registration requirement under section 116 of the SMO. Nevertheless, such securities shall, from a date to be determined and announced by the Authority, comply with all other applicable provisions of the SMO and Regulations, including any reporting requirements or continuous disclosure obligations imposed on such securities. The rationale for the exemption given to securities that have been offered before the enforcement of the SMO are as follows:1) There are a number of bonds / notes that were offered by the industry for several years before SMO issued. Registering all such securities may be difficult for the industry, especially those that dates back a number of years. AMBD wishes to facilitate business and not impose requirements that may cause unnecessary burden to the industry.

2) The reporting requirements and continuous disclosure obligation would be adequate and more relevant for the purposes of the Capital Market Supervisory oversight.

The second notice (CMS/2/2014) is on withdrawal of exemptions granted under the repealed Securities Order, 2001 and Mutual Funds Order, 2001. The notice applies to banks, insurance companies, takaful operators and companies licensed under the Registered Agents and Trustees Licensing Order, 2000 that were previously exempted from obtaining a Dealers licence or Investment advisers licence under the Securities Order, 2001 or automatically afforded an operators authorisation within the meaning of section 6(2) of the repealed Mutual Funds Order, 2001.The notice withdraws any exemptions provided to the persons above, whose activities falls within the purview of the SMO. Such persons shall submit an application to the Authority for a Capital Markets Services Licence (CMSL), before the end of the Transitional Period, which is a transitional period of one year which will commence on a date that will be determined and announced by the Authority. Any persons that fail to obtain the licence must cease carrying out all regulated activities on the expiry of the Transitional Period.The rationale for the notice is to clarify the requirements of SMO, where such companies that operate regulated activities are no longer exempted and required to obtain the CMSL.(b) Insurance/Takaful : General Agent Framework

Autoriti Monetari Brunei Darussalam (AMBD) in consultation with the industry had produced a new registration framework for general insurance and general takaful agents. This framework requires agents acting on behalf of general insurers and general takaful operators to undergo a 2-tier registration process with AMBD and Brunei Insurance & Takaful Association (BITA). The framework was launched on 1 July 2014 with existing agents to be expected to fully comply with the requirements by 1 January 2015. AMBD had issued 3 guidelines for the framework:

1) Guidelines on Registration of General Insurance Agents;2) Guidelines on Registration of General Takaful Agents; and3) Guidelines on Fit and Proper Criteria for Key Responsible Persons in Insurance and Takaful.

(c) Deregulation of interest/profit rates on residential property loans/financingOn 3rd October 2014, AMBD issued a Notice on the deregulation of interest/profit rates on residential property loans/financing of licensed banks and Perbadanan Tabung Amanah Islam Brunei (TAIB), which revoked the previous notice issued in March 2013 on the maximum rates set for residential property loans/financing.

With the current notice, all banks are free to price their Residential Property Loans/financing products within a reasonable range. The Authority will closely monitor lending to this sector and reserves the right to intervene from time to time to ensure a healthy competitive market for Residential Property Loans/Financing in the country.

These measures were taken in the background of the following:

a) To ensure the original objectives of the interest/profit rate regulation on residential property loans/financing (which are to make the loans/financing affordable and to lessen government spending on providing low cost housing).

b) To enable the active participation of all banks, especially those banks who withdrew their housing products from the market, or were restricting their sale, due to conflicts with their own internal pricing policy. The lack of consensus amongst the banks on the alternative proposal to link the housing financing rate to a moving benchmark of SIBOR.

(d) Power of Authority to CompoundAMBD has also issued a Notice on Power of Authority to Compound to all licensed banks on 19th June 2014 which is effective from 1st July 2014, where banks shall be subjected to the framework of compounding fines and penalties in the event of non-compliance with, or failure to meet, any prudential regulatory requirements that have been, or are currently in force, in relation to their operations and the conduct of their business. This Notice aims to ensure a high standard of compliance by all banks, thus reducing risks to the financial system and to depositors and in the interests of ensuring a level playing field in the banking industry.

TABLE 5: FINANCIAL SECTOR SOUNDNESS AND SUPERVISION

Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/12.514.018.021.118.820.920.421.119.3

Non-Performing Loans (net provision) to Capital (%) 2/4.66.612.08.44.94.34.54.45.5

Non-Performing Loans to Total Gross Loans (%) 3/7.79.311.28.57.66.85.75.76.2

Return on Assets (ROA, %) 4/1.91.51.51.51.10.81.31.51.3

Loan to Deposit Ratio (LTD, %) 5/43.034.839.134.726.930.033.632.933.1

Residential Real Estate Loans to Total Loans (%, optional) 6/N/AN/AN/A17.719.221.022.423.523.3

Notes:1/ Regulatory Capital to Risk-Weighted Assets is calculated as the ratio of aggregated regulatory capital to aggregated risk-weighted assets (following the Basel Guidelines).2/ Non-Performing Loans (net provision) to Capital is the ratio of value of non-performing loans less the value of specific loan provisions to total capital and reserves.3/ Non-Performing Loans to Total Gross Loans is calculated as the ratio of the value of non-performing loans to total value of the loan portfolio (including NPLs, and before the deduction of specific loan loss provisions).4/ Return on Assets is calculated as the ratio of net income before extraordinary items and taxes to average value of total assets (financial and non-financial).5/ Loan to Deposit Ratio is calculated as the ratio of total loans to total deposits (non-interbank loans and deposits).6/ Residential Real Estate Loans to Total Loans is calculated as the ratio of outstanding residential real estate loans to outstanding loans of depository institutions.


TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:1] [1: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Brunei Darussalam.]

ERPD Matrix IndicatorsAvailability(i)Timeliness(ii)Other Issues,if Any(iii)

I/ External Position and Market Access

Gross External Debt (% of GDP)

Gross Short-term External Debt (% of Foreign Reserves)

Current Account Balance (% of GDP)

Foreign Reserves (in months of imports)

II/ Fiscal Policy

Revenue (% of GDP)

Expenditure (% of GDP)

Overall Balance (% of GDP)

Primary Balance (% of GDP)

Central Government Debt (% of GDP)

III/ Monetary Policy

Monetary Framework and Recent Policy Responses

Headline Inflation (%, year-on-year)

Core Inflation (%, year-on-year, optional)

Money Growth (%, year-on-year)

Credit Growth (%, year-on-year)

IV/ Financial Sector Soundness and Supervision

Regulatory Capital to Risk-Weighted Assets (%)

Non-Performing Loans (net provision) to Capital (%)

Non-Performing Loans to Total Gross Loans (%)

Return on Assets (ROA, %)

Loan to Deposit Ratio (LTD, %)

Residential Real Estate Loans to Total Loans (%, optional)

Notes:1/ Data availability indicates if the data are available for provision by the authorities. In the case of non-available data, the data might be either non-existent or existent but have not been officially computed or provided by the authorities.2/ Data timeliness indicates how up-to-date the data have been as of the assessing period or the latest data point provided by the authorities to AMRO by the time of assessment. 3/ Other issues, if any, refer to any issues that might be related to the assessment of the provision of data and information of the four above EPRD Matrix areas, which could be consisted of, but not limited to, the consistency and accuracy of the data, and potential areas of improvements that the authorities could consider for their data provision in the future.

CAMBODIA


Indicators20072008200920102011201220131Q142Q143Q144Q142014



Current Account Balance (% of GDP) 3/-3.7-5.2-6.3-6.2-5.8-7.6-12.1-4.2-12.5

Foreign Reserves (in months of imports) 4/4.35.05.85.55.15.14.54.54.5

Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities).2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). The table below provides the current account balance excluding official transfers and net error and omission20072008200920102011201220131Q142Q14

Current Account Balance, excl. official transfers (% of GDP)-5.4-8.4-8.9-9.7-9.0-9.9-14.0-6.5-14.4

Net Errors and Omissions (% of GDP)-0.5-0.4-0.3-0.3-0.4-0.2-0.3-0.5-1.1

4/Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).


TABLE 2: FISCAL POLICY

Indicators20072008200920102011201220132014

Revenue (% of GDP) 1/12.113.311.913.213.214.515.0


Overall Balance (% of GDP) 3/-2.8-2.9-6.4-8.7-7.3-5.2-5.9

Primary Balance (% of GDP) 4/-2.6-2.7-6.2-8.4-7.0-4.9-5.5

Central Government Debt (% of GDP) 5/N/AN/AN/AN/AN/AN/AN/A

Notes: 1/ Revenue = Tax + Non-Tax Revenue.2/ Expenditure = Current Expenditure + Capital Expenditure.3/ Overall Balance = Revenue Expenditure.4/ Primary Balance = Overall Balance + Debt Service.5/ Central Government Debt = Domestic Central Government Debt + Foreign Central Government Debt.



Indicators20072008200920102011201220131Q142Q143Q144Q142014


Headline Inflation (%, year-on-year) 1/7.625.1-0.44.05.53.02.94.64.7



Credit Growth (%, year-on-year) 4/76.055.06.323.431.228.026.723.221.8

Notes:.1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation. Currently CPI data covers only the capital city (Phnom Penh). A national CPI data with provincial price index integrated has yet been made available.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. 3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. With unofficial dollarization, it is difficult to ascertain total amount of foreign currency in circulation and the actual figure of the money supply in Cambodia. Statistics published by the National Bank of Cambodia include only deposits in banks (denominated in both local and foreign currencies) and bills in circulation (in local currency only). 4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year.




Objective Price stability: Law on the Organization and Conduct of the National Bank of Cambodia (NBC) sets price stability in order to facilitate economic development within the framework of the country's economic and financial policy as the principal mission of the NBC.However, the central banks ability to use traditional monetary instruments in conducting monetary policy is limited due to high dollarization in the economy.

Regime Cambodia has adopted managed float exchange rate regime. The exchange rate has been stabilized but there is neither anchor nor specific band of exchange rate fluctuation.

InstrumentsGiven the lack of instruments, the NBC has used foreign exchange interventions to regulate the local currency liquidity and to smooth fluctuations in the exchange rate. Reserve requirements and refinancing facilities, have been introduced to avoid distortion inducing credit controls. No interest rate is set as benchmark and there are no quantitative restrictions on bank lending. Foreign Exchange Rates: When there is an upward pressure on the exchange rate, the US dollar auction is made by the NBC in order to realign the fluctuation. The NBC has no intention to intervene to resist the downward pressure, except in circumstances of disorderly market movements. Reserve requirements: Banking institutions are required to hold sufficient eligible assets, over the maintenance period, with the Central Bank, to effectively support safe and sound operational liquidity management. Currently, the NBC demands a commercial bank to maintain reserve requirements against deposits and borrowings at a daily average balance equal to 8% in the local currency and 12.5% in foreign currencies. Refinancing facilities: The NBC determined a refinancing base interest rate of 0.5% per month or 6% per year for the local currency refinancing for commercial banks in order to allow the banks more flexibility to set their interest rates since January 2002. Negotiable Certificates of Deposits (NCDs): NBC has issued the Negotiable Certificates of Deposits (NCDs) since September 2013. It would be a new market based monetary policy instrument in the future. Currently, the amount of issued NCDs is still limited.


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/23.627.632.331.426.225.024.825.324

Non-Performing Loans (net provision) to Capital (%) 2/2.95.94.73.42.83.03.63.73.9



Loan to Deposit Ratio (LTD, %) 5/649576758387979891

Residential Real Estate Loans to Total Loans (%, optional) 6/N/AN/AN/AN/AN/AN/AN/AN/AN/A

Notes:1/ Regulatory Capital to Risk-Weighted Assets is calculated as the ratio of aggregated regulatory capital to aggregated risk-weighted assets (following the Basel Guidelines).2/ Non-Performing Loans (net provision) to Capital is the ratio of value of non-performing loans less the value of specific loan provisions to total capital and reserves.3/ Non-Performing Loans to Total Gross Loans is calculated as the ratio of the value of non-performing loans to total value of the loan portfolio (including NPLs, and before the deduction of specific loan loss provisions).4/ Return on Assets is calculated as the ratio of net income before extraordinary items and taxes to average value of total assets (financial and non-financial).5/ Loan to Deposit Ratio is calculated as the ratio of total loans to total deposits (non-interbank loans and deposits). As the economy is highly dollarized, a large share of bank deposits is in foreign currency. Below are the ratios of foreign currency deposits to total deposits in Cambodias banks from 2007: 20072008200920102011201220131Q142Q14

Foreign Currency Deposits (% of Total Deposits)98.097.096.496.896.395.795.295.595.7

6/ Residential Real Estate Loans to Total Loans is calculated as the ratio of outstanding residential real estate loans to outstanding loans of depository institutions.


TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:2] [2: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Cambodia.]

ERPD Matrix IndicatorsAvailability(i)Timeliness(ii)Other Issues, if Any(iii)






II/ Fiscal Policy

Revenue (% of GDP)



















CHINA


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Gross External Debt (% of GDP) 1/11.58.68.69.39.59.09.3N/AN/A

Gross Short-term External Debt (% of Foreign Reserves) 2/15.411.610.813.215.716.317.7N/AN/A

Current Account Balance (% of GDP) 3/10.19.34.94.01.92.62.00.33.2


Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities)2/ Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/ Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/ Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).



Indicators20072008200920102011201220132014

Revenue (% of GDP) 1/19.319.5 20.120.722.022.622.7



Primary Balance (% of GDP) 4/N/AN/A-2.3-2.0-1.3-1.0-1.6


Notes: Fiscal year starts with January and ends in December in the following year. 1/ Revenue = Tax + Non-Tax Revenue.2/ Expenditure = Current Expenditure + Capital Expenditure.3/ Overall Balance = Revenue Expenditure.4/ Primary Balance = Overall Balance + Debt Service.5/ Central Government Debt = Domestic Central Government Debt + Foreign Central Government Debt.



Indicators20072008200920102011201220131Q142Q143Q144Q142014


Headline Inflation (%, year-on-year) 1/4.85.9-0.73.35.42.62.62.32.2




Notes: 1/ Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/ Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. China does not disclose core inflation officially. 3/ Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. For China, M2 is used in the above table.4/ Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. These numbers are presented as italic. In the case of China, "Financial Institution Loan" published by the People's Bank of China is used. Annual credit growth is calculated as year on year percentage change of the defined credit at the end month of the calendar year".



Monetary Policy Framework and Recent Policy Responses in China


Monetary policy objectivesThe objective is to maintain the stability of the value of the currency and thereby promote economic growth.Monetary policy instruments and implementation of monetary policyTo implement monetary policy, the People's Bank of China may apply the following monetary policy instruments: Require banking institutions to place deposit reserves at a given ratio; Determine the benchmark interest rate of the central bank; Conduct rediscount for banking financial institutions with accounts in the People's Bank of China; Provide lending to commercial banks; Trade treasury bonds, other government securities, financial bonds and foreign exchange on the open market; and Other monetary policy instruments specified by the State Council. RMB exchange rate regimeA managed floating exchange rate regime is based on market supply and demand with reference to a basket of currencies.Decision-making of monetary policy The People's Bank of China shall, under the leadership of the State Council. The People's Bank of China shall report to the State Council its decisions concerning annual monetary supply, interest rate, exchange rate and other important issues specified by the State Council for approval before they are implemented. The People's Bank of China may, on its own, make and put into immediate effect decisions on other monetary policy issues.The Monetary Policy Committee is a consultative body for the making of monetary policy by the PBC, whose responsibility is to advise on the formulation and adjustment of monetary policy and policy targets for a certain period, application of monetary policy instrument, major monetary policy measures and the coordination between monetary policy and other macroeconomic policies.

Recent Policy Responses (2014)

In June, removed the ceiling for small value foreign currency deposits in Shanghai area; In June, reduced DRR in commercial banks to guide credit flow to agricultural sector, rural areas, farmers and small and micro enterprises; In April, reduced Deposit Reserve Ratio (DRR) in county level rural commercial banks to guide credit flow to agricultural sector, rural areas, farmers; In March, widened the daily trading band with USD from 1% to 2%. Combined with Short-term Liquidity Operations (SLO), efforts were made to conduct the open market operations flexibly for conducting two-way adjustments. The Medium-term Lending Facility(MLF) was launched and conducted in September and October, so as to keep the total liquidity at appropriate levels and to reduce the financing cost of the real economy; New central bank supportive loans and discount instruments were launched to bring their roles into fuller play and to optimize the credit structure. In late November, the PBOC cut the benchmark lending rate by 0.40%, to 5.6% from 6%, to stimulate the economy.


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/N/AN/AN/A12.212.713.312.212.112.4

Non-Performing Loans (net provision) to Capital (%) 2/N/AN/AN/A-2.1-4.0-4.5-11.6-11.4-11.2

Non-Performing Loans to Total Gross Loans (%) 3/N/AN/AN/A1.11.01.01.01.01.1

Return on Assets (ROA, %) 4/N/AN/AN/A1.11.31.31.31.41.4


Residential Real Estate Loans to Total Loans (%, optional) 6/N/AN/AN/AN/AN/AN/AN/AN/AN/A



TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:3] [3: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of China.]







II/ Fiscal Policy

Revenue (% of GDP)



















HONG KONG, CHINA


Indicators20072008200920102011201220131Q142Q143Q144Q142014





Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities).2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).



IndicatorsFY07/08FY08/09FY09/10FY10/11FY11/12FY12/13FY13/14FY14/15

Revenue (% of GDP) 1/21.718.519.221.222.621.721.4


Overall Balance (% of GDP) 3/7.50.21.84.23.83.21.0

Primary Balance (% of GDP) 4/7.50.31.84.33.83.21.1


Notes: Fiscal year starts with April and ends in May in the following year. Interest payment includes HK$20 billion Government bonds and notes issued in 2004 only. Government debts includes HK$20 billion Government bonds and notes issued in 2004 and the Government bonds issued under the Government Bond Program. Gross government assets are larger than gross debts.

1/ Revenue = Tax + Non-Tax Revenue. 2/ Expenditure = Operating Expenditure + Capital Expenditure bond repayments. 3/ Overall Balance = Revenue - Expenditure. 4/ Primary Balance = Overall Balance + Interest Payment.5/ Government Debts= Government Debts + Government Bonds (excluding exchange fund bills and exchange fund notes). 6/ GDP is nominal and from April to March in the corresponding financial year.



Indicators20072008200920102011201220131Q142Q143Q144Q142014


Headline Inflation (%, year-on-year) 1/2.04.30.52.45.34.14.34.23.7



Credit Growth (%, year-on-year) 4/15.610.3-2.423.313.87.213.817.614.8

Notes: The quarterly data in this table refer to the simple average of the monthly data. For example, Q2 year-on-year growth rate equals average of year-on-year growth rates in April, May and June.

1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. Hong Kong does not disclose core inflation officially.3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. For Hong Kong, M3 is used in the above table.4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year. In the case of Hong Kong, the sum of trade finance and other loans for use in Hong Kong published by HKMA is used.



Policy Framework

Objective Monetary stability: The HKMA is responsible for achieving the monetary policy objective in Hong Kong determined by the Financial Secretary, including determining the strategy, instrument and operational means for doing so, and for maintaining the stability and integrity of the monetary system of Hong Kong. Currency stability: The monetary policy objective of Hong Kong is currency stability, defined as a stable external exchange value of the currency of Hong Kong, in terms of its exchange rate in the foreign exchange market against the USD, at around HKD7.80 to USD1.

Regime Currency board system: The structure of the monetary system is characterized by Currency Board arrangements, requiring the HKD Monetary Base to be at least 100 per cent backed by, and changes in it to be 100 per cent matched by corresponding changes in, USD reserves held in the Exchange Fund at the fixed exchange rate of HKD7.80 to USD1. Interest rate adjustment mechanism: Under the Currency Board system, the stability of the HKD exchange rate is maintained through an automatic interest rate adjustment mechanism. When there is a decrease in demand for HKD assets and the HKD exchange rate weakens to the convertibility rate, the HKMA stands ready to purchase HKDs from banks, leading to a contraction of the Monetary Base. Interest rates then rise, creating the monetary conditions conducive to capital inflows so as to maintain exchange rate stability. Conversely, if there is an increase in the demand for HKD assets, leading to a strengthening of the exchange rate, banks may purchase HKDs from the HKMA. The Monetary Base correspondingly expands, exerting downward pressure on interest rates and so discouraging continued inflows.

Instruments Lender of last resort: In the event of a bank facing serious funding difficulties, the HKMA may decide to provide Lender of Last Resort (LoLR) support if it is satisfied that the banks failure may pose systemic risk. Under the LoLR framework, the HKMA can employ a wide range of instruments, such as repos, FX swaps and credit facilities, to provide funding support to a problem bank. The range of eligible collateral for LoLR support includes bank placements, residential mortgage loans and investment-grade securities denominated in HKD or other currencies. FX swaps and term repos: For system-wide HKD liquidity shortage, the HKMA may provide liquidity assistance to banks via FX swaps and term repos against HKD or foreign-currency denominated securities of acceptable credit quality. These were originally two of the five temporary measures introduced in September 2008 during the global financial crisis to help relieve tensions in the local interbank market. Upon expiry of the five temporary measures at end-March 2009, the HKMA decided to incorporate FX swaps and term repos into our ongoing market operations to offer HKD liquidity assistance to banks if needed, on a case-by-case basis.

Major Policy Responses and Updates (2014)

Policy ResponsesFX operation under the Currency Board system: In July and early August 2014, the HKMA passively sold HKD in response to banks triggering of the Strong-side Convertibility Undertaking at HK$7.75/US$1, the first time since December 2012. Strong demand for the HKD was mainly triggered by portfolio inflows and commercial activities including M&A and dividend distribution.


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/N/A14.816.915.915.815.715.915.916.1

Non-Performing Loans (net provision) to Capital (%) 2/N/A3.73.51.91.61.41.51.41.4

Non-Performing Loans to Total Gross Loans (%) 3/N/A1.21.60.80.70.60.50.50.6

Return on Assets (ROA, %) 4/N/A0.60.80.90.80.91.11.11.0


Residential Real Estate Loans to Total Loans (%, optional) 6/N/AN/AN/AN/A15.815.714.113.513.3



TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:4] [4: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Hong Kong, China.]

ERPD Matrix IndicatorsAvailability(i)Timeliness(ii)Other Issues, if Any(iii)






II/ Fiscal Policy

Revenue (% of GDP)








Core Inflation (%, year-on-year, optional)Instead of core inflation indicator, the government releases the underlying CPI which excludes one-off relief measures impact on the headline CPI.











INDONESIA[footnoteRef:5] [5: Financial sector soundness and supervision matrix was not reported here, as the part was not confirmed by Indonesian authorities as of November 27, 2014. ]


Indicators20072008200920102011201220131Q142Q143Q144Q142014



Current Account Balance (% of GDP) 3/2.40.02.00.70.2-2.8-3.3-2.1-4.3


Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities).2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).



Indicators20072008200920102011201220132014

Revenue (% of GDP) 1/17.919.815.715.516.316.215.8



Primary Balance (% of GDP) 4/0.81.70.10.60.1-0.6-1.1

Central Government Debt (% of GDP) 5/35.233.028.326.024.424.0N/A




Indicators20072008200920102011201220131Q142Q143Q144Q142014



Core Inflation (%, year-on-year, optional) 2/ 6.38.34.34.34.34.44.44.64.8



Notes:1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. 3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. 4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year.




Objective Stability of the Rupiah: Article 7 of Act No. 3 of 2004 stipulates BIs goal as achieving and maintaining the stability of the rupiah. This goal is defined as a stability of prices for goods and services reflected in inflation.Exchange rate stability plays a crucial role in achieving price and financial system stability. So Bank Indonesia also operates an exchange rate policy designed to minimize excessive rate volatility, rather than to peg the exchange rate to a particular level.

Regime Inflation targeting: Bank Indonesia has opted for a working framework known as the Inflation Targeting Framework, adopted in July 2005, by replacing the previous monetary policy target using base money. Current years inflation target has been set at 4.5% +/- 1% in terms of the year-on-year rate of increase in CPI. In accordance with this target, Bank Indonesia will continue to maintain rupiah stability in line with its fundamental value.

Policy rate The BI Rate: The BI Rate is announced by the Board of Governors of Bank Indonesia in each monthly Board of Governors Meeting. It is implemented in the Bank Indonesia monetary operations conducted by means of liquidity Managementon the money market to achieve the monetary policy operational target. The monetary policy operational target is reflected in movement in the Interbank Overnight Rate. It is then expected that bank deposit rates will track the movement in interbank rates, with bank lending rates following suit.

Instruments Open market operations (OMOs): This is implemented to achieve overnight interbank rate as the operational target of monetary policy. OMOs are divided into the two following categories; (1) Contractionary OMOs: using instruments with (i) SBI and SBIS issuance, (ii) Reverse Repo of Government Securities (SBN) transactions, (iii) Outright sale of Government Securities (SBN), (iv) Term Deposit and (v) Foreign exchange selling transactions against Rupiah. (2) Expansionary OMOs: using instruments with (i) Repo transactions, (ii) Outright purchase of Government Securities (SBN) and (iii) Foreign exchange buying transactions against Rupiah. [note] Standing facilities: Standing facilities are parts of monetary operation which function to limit the volatility of overnight interbank rates. (1) Provision of Rupiah funds to bank (lending facility): the facility for banks experiencing liquidity problems by using its SBI and/or SBN as an underlying for the repo transaction with Bank Indonesia. (2) Placement of Rupiah funds in Bank Indonesia by banks (deposit facility): the facility for banks with excess liquidity by placing its own funds to Bank Indonesia.

Decision Making Process Monetary Policy Committee (MPC): The monetary policy stance is adopted by Bank Indonesia in the Board of Governors Meeting. This meeting convenes in the first week of each month for a comprehensive assessment of the latest developments in macroeconomic and policy conditions and of projections for the economy, including inflation. The Board Meeting is valid if attended by more than half of the members of the Board of Governors. Decisions in a Board meeting are adopted through mutual deliberation to achieve a consensus. If the meeting fails to reach a consensus, the Governor shall adopt a final decision.

Major Policy Responses and Updates

Policy Responses BI rate hikes: BI raised the BI rate by 175 bps in 2013 in order to anchor inflation expectations as well as to stabilize the financial market and reduce the current account deficit. In November 2014, BI raised the rate by 25 bps in response to a fuel subsidy reduction. Macroprudential: BI reduced loan-to-value (LTV) ratio for the purchase of a second property to 60% and to 50% for purchases beyond the second property (Sep. 2013)

Other Updates Bilateral Swap Arrangement (BSA): BI extended BSA with Japan (Dec. 2013, USD 22,76 bn). Billateral Currency Swap Arrangement (BCSA) : BI extended BCSA with China (Oct 2013, CNY100 billion or equivalent IDR175 trillion) and entered BCSA with Korea (March 2014, KRW 10.7 trillion or equivalent IDR 115 trillion).

TABLE 5: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:6] [6: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Indonesia.]







II/ Fiscal Policy

Revenue (% of GDP)



















JAPAN


Indicators20072008200920102011201220131Q142Q143Q144Q142014



Current Account Balance (% of GDP) 3/4.93.02.94.02.21.00.7-0.70.3


Notes: 1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors. (nb: not including contingent liabilities).2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance (as % of GDP) = Current account balance / GDP = (Exports - Imports) + Net Service + Net income from abroad + Net current transfers) / GDP at current year4/Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import of goods and services value (BOP, 12-month average).



Indicators20072008200920102011201220132014

Revenue (% of GDP) 1/31.231.629.629.630.831.231.7


Overall Balance (% of GDP) 3/2.14.110.49.39.88.78.3

Primary Balance (% of GDP) 4/2.13.89.98.69.07.87.6





Indicators20072008200920102011201220131Q142Q143Q144Q142014


Headline Inflation (%, year-on-year) 1/0.11.4-1.3-0.7-0.30.00.41.51.6

Core Inflation (%, year-on-year, optional) 2/ 0.01.5-1.3-1.0-0.2-0.10.41.31.3


Credit Growth (%, year-on-year) 4/0.94.0-1.3-2.00.71.92.82.52.8

Notes: For headline and core inflation, the direct effect from the consumption tax hike in April 2014 is excluded for the 2Q 2014 data.

1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. 3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 pluses deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. 4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year.




Objective Price stability. The Bank of Japan (BOJ) Act states that the BOJ's monetary policy should be "aimed at achieving price stability, thereby contributing to the sound development of the national economy."

Regime The BOJ conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability. The "price stability target" is the inflation rate that the BOJ judges to be consistent with price stability on a sustainable basis. The BOJ recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the BOJ sets the "price stability target" at 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) -- a main price index.

Instruments According to the guideline for money market operations decided at MPMs, the BOJ controls the amount of funds in the money market, mainly through money market operations. The BOJ supplies funds to financial institutions by, for example, extending loans to them, which are backed by collateral submitted to the Bank by these institutions. Such an operation is called a funds-supplying operation. The opposite type of operation, in which the BOJ absorbs funds by for example issuing and selling bills, is called a funds-absorbing operation.

Decision-Making Process The basic stance for monetary policy is decided by the Policy Board at Monetary Policy Meetings (MPMs). At MPMs, the Policy Board discusses the economic and financial situation, decides the guideline for money market operations and the BOJ 's monetary policy stance for the immediate future, and announces decisions immediately after the meeting concerned.

Major Policy Responses and Updates (since 2013)

On April 4 2013, The BOJ introduced the "quantitative and qualitative monetary easing" (QQE) to achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the CPI at the earliest possible time, with a time horizon of about two years. Under the QQE, the BOJ continues to pursue a new phase of monetary easing both in terms of quantity and quality. It will double the monetary base and the amounts outstanding of Japanese government bonds (JGBs) as well as exchange-traded funds (ETFs) in two years, and more than double the average remaining maturity of JGB purchases. On February 2014, BOJ decided to double the scale of (i) the Fund-Provisioning Measure to Stimulate Bank Lending and (ii) the Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth, and to extend the application period for these facilities by one year. On October 2014, BOJ decided to expand the QQE. The pace of increase in the monetary base is accelerated from 60-70 trillion to 80 trillion. In addition, the target amount of JGB purchase is increased from JPY50 trillion to JPY80 trillion with extended maturity from 7 years to 7-10 years.


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/12.6 12.0 12.4 13.9 14.2 14.2 15.9 15.6

Non-Performing Loans (net provision) to Capital (%) 2/17.0 16.0 26.3 22.6 22.2 21.4 17.8 16.2

Non-Performing Loans to Total Gross Loans (%) 3/3.1 2.9 2.6 2.5 2.4 2.4 2.1 1.9

Return on Assets (ROA, %) 4/0.40 0.20 0.21 0.40 0.33 0.27 0.39 0.36

Loan to Deposit Ratio (LTD, %) 5/0.76 0.78 0.79 0.77 0.75 0.75 0.76 0.76

Residential Real Estate Loans to Total Loans (%, optional) 6/14.4 13.8 14.3 14.3 14.2 14.1 13.9 13.9 13.9



TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:7] [7: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Japan.]







II/ Fiscal Policy

Revenue (% of GDP)



















KOREA


Indicators 20072008200920102011201220131Q142Q143Q144Q142014





Notes: GDP in 2014 is estimated using the GDP in 1Q 2014.1/Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors.(nb: not including contingent liabilities)2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/Foreign Reserves = months of import cover of foreign reserves = foreign reserves/monthly import value (12-month average).



Indicators20072008200920102011201220131Q142Q143Q144Q142014

Revenue (% of GDP) 1/23.422.721.821.421.922.622.05.511.1

Expenditure (% of GDP) 2/19.821.323.320.122.121.321.06.712.8

Overall Balance (% of GDP) 3/3.61.4-1.51.31.41.31.0-1.2-1.7

Primary Balance (% of GDP) 4/N/AN/AN/AN/AN/AN/AN/AN/AN/A

Central Government Debt (% of GDP) 5/28.728.031.231.031.632.234.333.334.6

Notes: 1/ Revenue = Tax + Non-Tax Revenue + Social Security Contribution.2/ Expenditure = Current Expenditure + Capital Expenditure + Net Lending (including Net Acquisition). 3/ Overall Balance = Revenue Expenditure & Net Lending.4/ Primary Balance = Overall Balance + Interest Payment (not an official data). National authorities do not officially calculate primary balance and no data for this indicator are thus provided.5/ Central Government Debt = Domestic Central Government Debt + Foreign Central Government Debt + Central Government Guaranteed Debt.



Indicators20072008200920102011201220131Q142Q143Q144Q142014



Core Inflation (%, year-on-year, optional) 2/2.34.33.61.83.21.61.61.92.2



Notes:1/ Headline inflation is defined as the year-on-year percentage change of Consumer Price Index(CPI). Annual headline inflation is calculated as the growth rate of 12-month average headline CPI.2/ Core inflation is defined as the percentage change in the CPI excluding prices of agricultural products and oil. Annual core inflation is calculated as the growth rate of 12-month average core CPI. 3/ Annual money growth is calculated as the growth of M2 based on the end of calendar year. M2 is defined as currency in circulation and deposits.4/ Credit growth is calculated as the growth in total loans of commercial and specified banks in Korea, based on the end of the calendar year.



Policy Framework

Objective Price stability: Bank of Korea (BOK) Act sets it as the main purpose of the BOK's establishment in 1950. Financial stability: In order for the national economy to achieve stable growth, a revised BOK Act was promulgated on 16 September 2011 and included The Bank of Korea needs to pay attention to financial stability in the implementation of monetary policy. Thus, the Bank of Korea is also making policy efforts to maintain financial stability while pursuing price stability through implementing its monetary policy.

Regime Inflation targeting: The BOK has adopted inflation targeting as the operational framework for its monetary policy since 1998. The inflation target for 2013~2015 has been set at 2.5%~3.5% in terms of the year-on-year rate of increase in CPI.

Policy Rates The BOK Base Rate: This is the reference rate applied in transactions between the BOK and financial institutions, such as repurchase agreements (RPs) and the Banks liquidity adjustment deposits and loans. The Base Rate is used as a fixed bid rate for its sales of 7-day RPs and as the minimum bid rate for its purchases of 7-day RPs. Monetary Policy Committee (MPC): MPC determines the Base Rate every month. The Monetary Policy Committee applies a holistic approach, taking into overall account domestic price movements, the economy, financial and foreign exchange market conditions, changes in the flow of the world economy, etc.The minutes are released on Tuesdaytwo weeks after the meeting.

Instruments Open market operations: The BOK buys or sells securities with financial institutions in the open markets, thereby influencing the amount of money in circulation and/or interest rates. These operations are conducted in three ways: (i) through outright or RP (mostly with 7-day maturities) transactions of securities such as government bonds, government-guaranteed bonds, and securities specified by MPC, (ii) through the issuance and repurchase of Monetary Stabilization Bonds (MSBs) which have relatively long maturities, (iii) and through commercial banks term deposits made in the Monetary Stabilization Account (MSA). Lending and deposit facilities: Through these, the BOK supplies loans to or receives deposits from individual banking institutions.Lending facilities include (i) Liquidity Adjustment Loans, (ii) Bank Intermediated Lending Support Facility (formerly Aggregate Credit Ceiling Loans), (iii) Intraday Overdrafts, and (iv) special loans such as Emergency Credit to financial institutions and Credit to for-profit enterprises. The BOK also operates 'Liquidity Adjustment Deposit' facilities, which enable financial institutions to deposit their excess cash arising in the process of their supply of and demand for funds. The interest rates of liquidity adjustment deposits and loans are 100bp below and above the Base Rate, respectively. Reserve requirements: Commercial banks and special banks are obliged to hold a certain ratio of their liabilities subject to reserve requirements (Reserve Requirement Ratio, RRR) in their accounts with the central bank. RRR varies depending upon their deposit liability types; 0.0% for long-term savings deposits for housing, property formation savings; 2.0% for time deposits, installment savings, mutual installments, housing installments, CDs; 7.0% for others.

Major Policy Responses and Updates (as of August 2014)

Policy Responses Base Rate Cut: In August 2014, the BOK lowered the Rate by 25 bps to 2.25 percent. Credit Policy: Apart from the Base Rate, there has been a thorough realignment of the Aggregate Credit Ceiling Loans system (ACCL), including target sectors, support ceilings, interest rates and renaming of the ACCL into Bank Intermediated Lending Support Facility. In terms of the conduct of monetary policy, the Bank of Korea has begun to make public the number of votes cast for or against the Base Rate setting decisions at the press briefing held immediately after the policy meeting.

Other Updates Bilateral Swap Arrangements (BSAs): BOK made or promised to establish BSAs with several central banks recently: Indonesia (Mar 2014), UAE (Oct, 2013), Malaysia (Oct 2013), Australia (Feb 2014) while it ended its existing BSA with Japan (Jul 2013).


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Regulatory Capital to Risk-Weighted Assets (%) 1/12.312.314.414.614.014.314.514.114.2

Non-Performing Loans (net provision) to Capital (%) 2/N/AN/AN/AN/AN/AN/AN/AN/AN/A




Residential Real Estate Loans to Total Loans (%, optional) 6/27.225.627.228.428.528.528.127.827.9



TABLE 6: DATA ADEQUACY PRIMARY EVALUATION BASED ON ERPD MATRICES[footnoteRef:8] [8: Secondary evaluation based on AMRO Economic Reports is separately provided in AMROs November 2014 surveillance report of Korea.]







II/ Fiscal Policy

Revenue (% of GDP)

















Residential Real Estate Loans to Total Loans (%)


LAO PDR


Indicators20072008200920102011201220131Q142Q143Q144Q142014

Gross External Debt (% of GDP) 1/57.948.748.254.651.849.648.2N/AN/A

Gross Short-term External Debt (% of Foreign Reserves) 2/N/AN/AN/AN/AN/AN/AN/AN/AN/A

Current Account Balance (% of GDP) 3/ 4/2.51.7-1.10.42.0-4.23.6-0.3N/A

Foreign Reserves (in months of imports) 5/6.05.45.24.33.45.14.84.64N/A

Notes: Recent current account revisions are due to high values of errors and omissions in the balance of payments.1/ Gross External Debt = current liabilities owed to non-residents by residents of the economy = external debt of general government + monetary authority + banks + other sectors.(nb: not including contingent liabilities).2/Gross Short-Term External Debt = external debt with (original) maturity of one year or less. 3/Current Account Balance = net exports of goods and services + net primary income + net secondary income (net current transfers). 4/ The current account and the capital account have occasionally been inaccurate due to large errors and omissions and have been revised from time to time. The table below provides the current account balance excluding official transfers and net error and omission

200720082008200920102011201220131Q 14

Current Account Balance, excl. Official Transfers (% of GDP)[footnoteRef:9] [9: AMRO staff calculations based on the data provided by national authorities.]

-0.51.40.3-2.8-1.20.1-6.0-5.0-0.7

Net Errors and Omissions (% of GDP)9-7.2-7.9-9.1-4.8-10.6-8.5-4.5-0.5-2.1

5/Foreign Reserves = months of import cover of foreign reserves = foreign reserves / monthly import value (12-month average).



IndicatorsFY07/08FY08/09FY09/10FY10/11FY11/12FY12/13FY13/14FY14/15

Revenue (% of GDP) 1/17.817.322.322.424.124.424.3



Primary Balance (% of GDP) 4/-2.3-2.8-1.6-1.3-0.6-5.1-3.4

Central Government Debt (% of GDP) 5/ N/AN/AN/AN/AN/AN/AN/A

Notes: Fiscal year starts with October in the previous year and ends in September in the following year. FY13/14 is as of 2Q 2013 (calendar year)1/ Revenue = Tax + Non-Tax Revenue + Grant. In the case of Lao PDR, revenue includes grant.2/ Expenditure = Current Expenditure + Capital Expenditure.3/ Overall Balance = Revenue Expenditure.4/ Primary Balance = Overall Balance + Debt Service. In the case of Lao PDR, debt service only includes interest payment.5/ Central Government Debt = Domestic Central Government Debt + Foreign Central Government Debt.


TABLE3: MONETARY POLICY

Indicators20072008200920102011201220131Q142Q143Q144Q142014






Notes:1/Headline Inflation is defined as year on year percentage change of Consumer Price Index (CPI). Annual headline inflation is calculated as the average of monthly year-on-year inflation.2/Core Inflation is defined as the percentage change in the CPI excluding volatile prices, typically food, energy, and administrative prices. Annual core inflation is calculated as the average of monthly year on year core inflation. This definition may vary country to country. 3/Annual money growth is generally based on end of calendar year's M2 which is defined as currency in circulation and deposits. M3 is defined as M2 plus deposits at institutions that are not banks. These definitions of M2 and M3 may vary country to country. With certain degree of dollarization within the economy, it is certainly difficult to ascertain total amount of foreign currency in circulation, as well as the actual figures of the money supply in Lao PDR. The only data available for the amount of foreign currency in the economy is its share out of total bank deposits.4/Credit is generally defined as "total outstanding domestic bank loans excluding those to financial institutions. Inter-bank loans as well as loans used for off-shore are excluded as possible. Alternatively, for an economy of which full set of bank loan data is not available, "domestic claims to private sector by depository corporations excluding central bank" is used following to IMF MFSM 2000. Annual credit growth is calculated based on the end of the calendar year.


TABLE 4: MONETARY POLICY FRAMEWORK AND RECENT POLICY


Objective The Bank of Lao PDR (BoL) performs a combined monetary policy framework with an objective to promote and maintain the national monetary stability, as well as to contribute socio-economic development.

Regime The BoL undertakes a managed floating exchange regime as the main instrument in order to maintain the national monetary stability by keeping a close watch on exchange movements in both domestic and international as a basis to set a daily reference rate of LAK/USD. The BoL intervenes in the foreign exchange market if deems necessary as the lender of last resort, with an aim to provide sufficient foreign exchange liquidity to meet the demand of the society and diminish an illegal foreign exchange trading.

Instruments

In recent years, the BoL has used several instruments to implement monetary policy: Reserve Requirement: The reserve requirement has been set at 5 percent for LAK deposits and 10 percent for foreign currency deposi

Documents

ERPD Matrix Report - December 2014