Economics & Development

This chapter explores the critical role of trust in shaping tax policy, administration, and compliance. It argues that effective taxation depends on the cooperation of three key actors: politicians, bureaucrats, and citizens, whose interactions influence the design, implementation, and acceptance of tax systems. Trust in government institutions encourages voluntary tax compliance, strengthens the fiscal contract between citizens and the state, and enables more ambitious and sustainable tax reforms. Conversely, low levels of trust can undermine revenue collection, weaken policy implementation, and limit governments’ ability to move closer to the fiscal frontier. The chapter examines how trust affects tax outcomes, reform feasibility, and state capacity, highlighting its importance alongside technology and transparency in building efficient, equitable, and sustainable tax systems.

The country is currently experiencing moderate economic growth with a gradual recovery in private consumption and investment, low inflation, a relatively stable exchange rate, persistent fiscal deficits alongside rising general government debt, external accounts that have moved back toward surplus amid uneven trade dynamics, and a stagnant population. In the coming years, the Bank will focus on supporting broad-based and resilient growth by strengthening domestic demand, revitalizing gross investment, and enhancing export performance and trade competitiveness. Efforts will prioritize prudent fiscal management and debt sustainability, reinforce monetary and financial stability, and improve the efficiency of public spending. The Bank will also support measures to bolster the external position through trade facilitation and logistics improvements, while advancing private sector development to catalyze productivity and innovation. Given demographic headwinds, the agenda will include actions to raise labor force participation and skills, and to improve the investment climate to attract quality investment. Together, these priorities aim to stabilize macroeconomic conditions, increase resilience to shocks, and lay the foundation for sustainable, inclusive growth.

The development objective of the Second Habitat and Urban Land Project for Argentina is to: (i) promote formal and planned urban growth in selected cities; (ii) improve living conditions for households in selected precarious urban settlements; and (iii) respond effectively in case of an eligible crisis or emergency. The cancellation was designed to promote formal and planned urban growth, improve living conditions in informal settlements, and strengthen resilience to crises and emergencies. However, following a change in government administration in December 2023, national policy priorities shifted toward economic stabilization and expenditure rationalization, resulting in the deprioritization of housing and urban upgrading programs. The implementing agency, the Secretariat of Habitat, underwent significant institutional restructuring, including leadership and staffing changes, while a freeze on new federal housing commitments further constrained implementation. Although the World Bank explored restructuring options, including transferring implementation responsibilities to provincial entities, no viable path forward emerged. Consequently, project implementation did not progress beyond the disbursement of the front-end fee, leading to the cancellation of the operation.

Thailand is navigating moderate overall risks with political and policy continuity concerns, elevated environmental and social challenges linked to complex infrastructure, and exposure to extreme weather, trade fragmentation, energy price volatility, and global financial uncertainty, while pursuing a longer-term reform agenda to boost productivity and create more and better jobs. In the coming years, the World Bank Group will focus on a One WBG approach that combines IBRD financing, IFC investments, and potential MIGA support to advance priority outcomes through resilient transport connectivity, low carbon cities and carbon market development, chemicals phaseout and phasedown, flood management in the Chao Phraya Basin, coastal resilience, and community resilience. IFC will scale private capital mobilization and advisory support across sustainable finance, SME and women-led enterprise financing, microfinance, renewable energy, the circular economy, green buildings, water infrastructure, sustainable tourism, digital inclusion, and logistics, while helping financial sector clients expand sustainable and MSME financing, accelerate digital transformation, and develop new social and sustainable instruments. IFC will assist real sector clients to adopt new technologies, enter new markets, and transition to sustainable business models, including green building standards, and support government agencies in structuring public private partnerships in water and waste management, while exploring silver finance to strengthen retirement security, long-term care, and age-friendly housing. Knowledge work anchored in Advisory Services and Analytics, including the Country Growth and Jobs Report and growing Reimbursable Advisory Services on science, research and innovation policy, business enabling environment reform, skills and TVET, digital ID and digital blueprint, simplified tax regimes for small firms, and expanded social insurance coverage will inform policy actions and program design. The program will emphasize synergies in energy, water and wastewater, digital services, municipal finance, and sustainable finance, with strong implementation readiness, selectivity, sequencing, government ownership, and partner collaboration.