Posted on July 30, 2013 by iMFdirect
By Deniz Igan
(Version in Español)
Much has changed on the fiscal front since we started worrying about U.S. fiscal sustainability. The federal government budget deficit has fallen sharply in recent years―from almost 12 percent of GDP in 2009 to less than 7 percent in 2012. And recent budget reports show that the deficit is shrinking faster than expected only a few months ago, to a projected 4½ percent of GDP for the current fiscal year, which ends September 30. Plus, health care cost growth has slowed down dramatically since the Great Recession, alleviating the pressure on public health care programs at least temporarily.
Does this mean we can stop worrying? Not quite. Recent developments certainly mean that things are better than we thought just a few years ago and the fiscal adjustment needed to restore sustainability is smaller. But if the choice and timing of policy measures is not right, the deficit reduction may turn out to be too much in the short run—stunting the economic recovery—and not enough in the long run.
So, in our recent annual check-up of the U.S. economy, our advice is to slow the pace of fiscal adjustment this year—which would help sustain growth and job creation—but to speed up putting in place a medium-term road map to restore long-run fiscal sustainability.
Filed under: Advanced Economies, Economic Crisis, Economic research, Employment, Finance, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: Article IV, deficits, economic recovery, fiscal sustainability, IMF, iMFdirect, International Monetary Fund, public debt, United States | 3 Comments »
Posted on August 8, 2012 by iMFdirect
by Gian Maria Milesi-Ferretti
(Version in Español)
The United States and much of the world economy are still recovering from the devastating global recession that began in 2008. Sometimes crises happen that we cannot foresee or avoid.
But for the U.S. economy, serious risks could come at the end of this year from two potential self-inflicted wounds: the so-called “fiscal cliff” and the debt ceiling.
Let’s start with the fiscal cliff. In simple terms: if U.S. policymakers do nothing, a number of temporary tax cuts will expire and significant across-the-board spending reductions will kick in on January 1, 2013. The combined effect of these measures could result in a huge fiscal contraction, which would derail the economic recovery.
Why is this happening?
The payroll tax break, the Bush tax cuts (enacted in 2001 and 2003, and extended for two years at the end of 2010), as well as exemptions on the Alternative Minimum Tax are set to expire on January 1, 2013.
Filed under: Advanced Economies, Economic Crisis, Employment, Financial Crisis, Fiscal policy, growth, International Monetary Fund, Investment, Politics, Public debt, recession | Tagged: Bush tax cuts, Congress, debt ceiling, deficit, economic growth, economic recovery, federal government, financial markets, fiscal cliff, fiscal policy, Gian Maria Milesi-Ferretti, IMF, iMFdirect, iMFdirect blog, taxes, unemployment, United States | 5 Comments »
Posted on July 16, 2012 by iMFdirect
By Olivier Blanchard
(Versions in عربي, 中文, Español, Français, Русский, 日本語)
The global recovery continues, but the recovery is weak; indeed a bit weaker than we forecast in April.
In the Euro zone, growth is close to zero, reflecting positive but low growth in the core countries, and negative growth in most periphery countries. In the United States, growth is positive, but too low to make a serious dent to unemployment.
Growth has also slowed in major emerging economies, from China to India and Brazil.
Downside risks, coming primarily from Europe, have increased.
Let me develop these themes in turn.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: bank recapitalization, banks, Brazil, capital flows, China, economic policy, economic recovery, euro zone, Europe, exproters, financial markets, fiscal cliff, fiscal consolidation, France, Germany, government debts and deficits, growth, housing, IMF, iMFdirect blog, India, International Monetary Fund, Italy, loans, non-performing loans, Olivier Blanchard, Spain, structural reforms, unemployment, United States, WEO, World Economic Outlook | 10 Comments »
Posted on January 29, 2012 by iMFdirect
By Carlo Cottarelli
(Versions in عربي, 中文, Español, Français, Русский, 日本語)
The IMF has argued for some time that the very high public debt ratios in many advanced economies should be brought down to safer levels through a gradual and steady process. Doing either too little or too much both involve risks: not enough fiscal adjustment could lead to a loss of market confidence and a fiscal crisis, potentially killing growth; but too much adjustment will hurt growth directly.
At times over the last couple of years we called on countries to step up the pace of adjustment when we thought they were moving too slowly.
Instead, in the current environment, I worry that some might be going too fast.
Risk to recovery
The latest update of the Fiscal Monitor shows that fiscal adjustment is proceeding pretty quickly in the advanced economies—on average the deficit is projected to fall by a total of 2 percentage points of GDP in 2011-12. The decline is even larger in the euro area—about 3 percentage points of GDP. In a reasonably good growth environment this pace of adjustment would be fine. But in the current weaker macroeconomic environment bringing deficits down this quickly could pose a risk for the economic recovery. (more…)
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Finance, Fiscal policy, Public debt | Tagged: bond spreads, confidence, economic recovery, fiscal adjustment, Fiscal Monitor, government bonds, IMF, iMFdirect, International Monetary Fund, market behavior, medium-term fiscal consolidation, public debt, public deficits | 11 Comments »
Posted on September 23, 2011 by iMFdirect
The 2011 IMF-World Bank Annual Meetings are taking place in Washington DC as the global economy enters a dangerous new phase — financial markets jitters and risks to the recovery are giving everyone plenty to talk about. Here are our ‘must reads’ for the meetings. (more…)
Filed under: Annual Meetings, Economic outlook, IMF, International Monetary Fund | Tagged: 2011 World Bank-IMF Annual Meetings, Christine Lagarde, economic recovery, financial market turbulence, Fiscal Monitor, Global Financial Stability Report, global risks, low-income countries, Program of Seminars, World Economic Outlook | 4 Comments »
Posted on April 28, 2011 by iMFdirect
By Anoop Singh
(Version in 中文, 日本語 and 한국어)
As the economic recovery has matured across much of Asia, the region has continued to be a driving force in the strengthening global recovery. Yet, recent tragic events—around the globe, and the earthquake and tsunami in Japan—are an all too poignant reminder of the fragility of our economic circumstances and, indeed, life.
Much of this weighs on my mind as I am here in Hong Kong to launch our April 2011 Regional Economic Outlook: Asia and Pacific. While the outlook is by no means gloomy, it is an opportune time to consider how Asia should manage the next phase of growth. (more…)
Filed under: Asia, Economic outlook, Emerging Markets, International Monetary Fund | Tagged: capital inflows, commodity prices, domestic demand, economic growth, economic recovery, exports, financial risk, fiscal consolidation, global imbalances, global recovery, Macroeconomic policies, overheating, poverty, Regional Economic Outlook: Asia and Pacific, unemployment | Comments Off
Posted on April 11, 2011 by iMFdirect
By Olivier Blanchard
The world economic recovery is gaining strength, but it remains unbalanced.
Three numbers tell the story. We expect the world economy to grow at about 4.5 percent a year in both 2011 and 2012, but with advanced economies growing at only 2.5 percent, while emerging and developing economies grow at a much higher 6.5 percent.
On the good news side. Earlier fears of a double dip—which we did not share—have not materialized. (more…)
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, International Monetary Fund, Low-income countries | Tagged: bank recapitalization, capital controls, capital inflows, commodity prices, economic recovery, exchange rate, Financial regulation, financial stability, financial supervision, fiscal consolidation, Fiscal Stimulus, fiscal sustainability, inflation expectations, inventory cycle, macroprudential policies, policy coordination, potential output, private demand, unemployment, World Economic Outlook | 8 Comments »
Posted on March 22, 2011 by iMFdirect
Guest post by Joseph E. Stiglitz, Columbia University, and
co-host of the Conference on Macro and Growth Policies in the Wake of the Crisis
The most remarkable aspect of the recent conference at the IMF was the broad consensus that the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed. They failed to predict the crisis; standard models even said bubbles couldn’t exist—markets were efficient. Even after the bubble broke, they said the effects would be contained. Even after it was clear that the effects were not “contained,” they provided limited guidance on how the economy should respond. Maintaining low and stable inflation did not ensure real economic stability. The crisis was “man-made.” While in standard models, shocks were exogenous, here, they were endogenous. (more…)
Filed under: Economic Crisis, Economic research, Financial Crisis, International Monetary Fund | Tagged: capital flows, central banks, credit risk, cross-border linkages, economic recovery, financial markets, financial sector regulation, financial stability, fiscal policy, industrial policy, inflation, Joseph Stiglitz, Macro and Growth Policies in the Wake of the Crisis, macroeconomic models, macroeconomic policy, macroeconomic stability | 15 Comments »
Posted on February 18, 2011 by iMFdirect
Certainly the world did not end in 2008 with the collapse of Lehman and the crisis that followed. But, it didn’t mostly—perhaps only—because extraordinary international policy cooperation helped avert a far worse outcome.
… the G-20 has now to adapt to a new economic environment. It must prove that it is able to coordinate the economic policies of major economies on an ongoing basis.
French G-20 Presidency
G-20 Finance Ministers and Central Bank Governors gather in Paris for their first ministerial level meeting of France’s G-20 presidency at a critical juncture (more…)
Filed under: Economic outlook, Employment, G-20, Global Governance, Globalization, International Monetary Fund, Multilateral Cooperation | Tagged: commodity prices, Dominique Strauss-Kahn, economic recovery, food prices, G-20, G-20 MAP, G-20 mutual assessment process, global imbalances, inequality, international monetary cooperation, international monetary system, John Lipsky, Olivier Blanchard, policy coordination, unemployment | 3 Comments »
Posted on January 25, 2011 by iMFdirect
By Olivier Blanchard
(Version in Español | Français | Русский | عربي| 中文 | 日本語 )
The world economic recovery continues. But it remains a two-speed recovery: slow in advanced countries, and much faster in emerging and developing economies. As a result, tensions and risks are emerging, which require strong policy responses.
For some time, global activity was led by fiscal stimulus and the restocking of inventories. This process is now essentially over, which means that global growth is set to slow over the coming year. Fortunately, underlying private demand is improving, so we expect the slowdown to be modest, with global growth remaining at 4.4 percent in 2011, down from 5 percent in 2010. (more…)
Filed under: Advanced Economies, Economic outlook, Emerging Markets, International Monetary Fund, Low-income countries, 中文 | Tagged: bank recapitalization, capital flows, commodity prices, currency appreciation, economic recovery, financial markets, fiscal consolidation, Fiscal Stimulus, global imbalances, private demand, structural reform, unemployment | 7 Comments »