Making Goldilocks Happy

Posted on April 20, 2012 by iMFdirect

We have calculated that an increase in annual long-term economic growth of just a quarter of a percentage point could set in place a virtuous circle that would lead, after ten years, to a decline in the public debt-to-GDP ratio by 6 percentage points. This is because higher growth makes it easier to run a primary surplus and lowers the public debt-to-GDP ratio directly. This in turn lowers the interest rate, which in turn boosts economic growth.

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Finance, Fiscal policy, growth, recession | Tagged: , , , , , , , , , , , , | 2 Comments »

Fiscal Adjustment: Too Much of a Good Thing?

Posted on January 29, 2012 by iMFdirect

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.

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Finance, Fiscal policy, Public debt | Tagged: , , , , , , , , , , , , | 11 Comments »

How to Exit the Danger Zone: IMF Update on Global Financial Stability

Posted on January 24, 2012 by iMFdirect

Many of the root causes of the euro area crisis still need to be addressed before the system is stabilized and returns to health. Until this is done, global financial stability is likely to remain well within the “danger zone,” where a misstep or failure to address underlying tensions could precipitate a global crisis with grave economic and financial consequences.

Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Financial Crisis, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments »

Driving the Global Economy with the Brakes On

Posted on January 24, 2012 by iMFdirect

The world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected.

Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, Fiscal Stimulus, G-20, Global Governance, growth, IMF, Inequality, International Monetary Fund, Latin America, Low-income countries, Middle East, Public debt, recession | Tagged: , , , , , , , , , , , , , , | 8 Comments »

Strong Leadership, Collective Action Key to Economic Recovery

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.

Filed under: Annual Meetings, Economic outlook, IMF, International Monetary Fund | Tagged: , , , , , , , , , | 4 Comments »

Fiscal Glass is Half Full: Some Reasons for Optimism

Posted on September 21, 2011 by iMFdirect

In the midst of jittery financial markets, and global economic doom and gloom, it’s easy to become pessimistic. Public debt and fiscal deficits in many advanced economies remain very high.

Nevertheless, important progress has been made in fiscal adjustment—the fiscal outlook in most countries is stronger than we expected two years ago. So to the pessimists I say, don’t lose sight of what’s been achieved.

But, to the optimists (if there are any) I say, don’t underestimate what still needs to be done. The task that policymakers face is complicated. They need to ensure the public sector is not a source of instability by committing to a plan that will stabilize and then bring down public debt. At the same time, they need to make sure that fiscal tightening itself does not undermine the recovery.

Filed under: Advanced Economies, Economic outlook, Economic research, Fiscal policy, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , | 1 Comment »

Global Challenges, Global Solutions

Posted on April 14, 2011 by iMFdirect

The April 2011 IMF-World Bank Spring Meetings are upon us here in Washington DC. With global challenges that require global solutions—the theme of the meetings—IMF Managing Director Dominique Strauss-Kahn reminds us that this is “not the time for complacency.” Here’s a snapshot of what you need to know to get you through the meetings….

Filed under: Annual Meetings, Civil Society, Economic outlook, Employment, IMF, Inequality, International Monetary Fund, Multilateral Cooperation | Tagged: , , , , , , , , , , , , , , | 3 Comments »

Shifting Gears: Where the Rubber Meets the Fiscal Road

Posted on April 12, 2011 by iMFdirect

Undertaking a sizable fiscal adjustment is a lot like driving up a tall mountain: it’s hard work, it can take a long time, and you don’t want to run out of fuel partway up the incline. Countries are starting the climb, cutting back government deficits and debt levels, but according to our analysis often current plans aren’t enough to get countries where they need and want to go.

The plans in place are large by historical standards, which brings with it difficult choices, and particular risks and uncertainties. Let me fill you in on what these are.

Filed under: Economic Crisis, Fiscal policy, International Monetary Fund, Public debt | Tagged: , , , , , , , , , , , , | 1 Comment »

The Long and the Short of It—Government Debt Plans in 2011 and Beyond

Posted on February 1, 2011 by iMFdirect

Fiscal policy this year in some leading advanced economies is shaping up to be quite different from what was expected just last November, according to the just-published Fiscal Monitor update. Some of this change is attributable to the somewhat better than projected fiscal results in 2010. Most of it, however, is due to additional stimulus measures introduced in recent months.

Altogether, sovereign risks remain elevated and in some cases have increased since November 2010. No amount of deficit reduction this year, however, can be sufficient to restore countries’ fiscal accounts to robust good health. Putting the government accounts in order will require a multi-year effort. So, how are countries doing in setting out their longer-term plans? Here, we see somewhat of a mixed picture.

Filed under: Advanced Economies, Emerging Markets, Fiscal policy, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , | 2 Comments »

“Combination of Worries” Gets Attention in Davos

Posted on January 28, 2011 by iMFdirect

Europe’s sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These are the hot topics at this year’s World Economic Forum in Davos, Switzerland, and a clear sign of the tensions and risks as the global economy recovers.

In an interview from Davos, the IMF’s First Deputy Managing Director John Lipsky tells us that, with the return of global growth, the mood is certainly more optimistic than it was a year or two ago. But there is also a clear sense among delegates that this has not solved some of the world’s important economic problems.

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Emerging Markets, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , | 3 Comments »

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