While the current account deficit has declined, on average, in recent years – it stood at 3.3% of GDP in the second quarter of the year, down from a high of 5.8%, on average, in 2013 – it nonetheless appears elevated for an economy with weak demand and a negative output gap.
Domestic savings remain low, illustrating the risk of renewed deficit widening if demand, especially muchneeded investment demand, picks up. At the same time, the budget deficit has remained in excess of 3% of GDP in the past few years, despite repeated tax increases, resulting in a continued rise in the debt-to-GDP ratio, compounded by an increase in contingent liabilities linked to state-owned enterprises.