Posted on November 16, 2009 by iMFdirect
By Carlo Cottarelli
One obvious fallout of the global financial crisis is a huge deterioration in fiscal conditions, particularly in advanced countries. The numbers are nothing short of staggering. Gross general government debt in the G-20 advanced economies is projected to approach 120 percent of GDP by 2014, up from about 80 percent in 2007, and this is even assuming no renewal of fiscal stimulus beyond 2010.
Some might think that this comes from an “exotic” form of fiscal policy whereby governments opened their coffers to prop up financial institutions. But only a small part of this debt spike is matched by a rise in financial assets. It really boils down to “plain vanilla” deficits—revenue losses from the recession, fiscal stimulus, and some underlying spending increases that would have occurred even without a recession.
Filed under: Economic Crisis, Financial Crisis, Fiscal Stimulus, IMF | Tagged: debt overhang, debt ratios, fiscal exit strategies, fiscal space, Fiscal Stimulus, government spending, health spending, pensions, population aging | 2 Comments »
Posted on October 21, 2009 by iMFdirect
By Nicolás Eyzaguirre
(Version en español)
Although this time the external shocks were very strong in this year of global crisis, the Latin American and Caribbean (LAC) region has performed notably better than in the past, and also better than many other emerging market countries.
This improvement can be attributed to the fact that the region faced the crisis equipped with economic policy frameworks that were more solid and credible than in the past, and with smaller financial, external, and fiscal vulnerabilities. This allowed a number of countries of the region to implement countercyclical monetary and fiscal policies.
Figure 1 shows a measure of the benefits that this better preparation has brought. It compares the fall in average growth of GDP actually observed in Brazil, Chile, Colombia, Mexico, and Peru (solid line) with our best estimate of the decline that would have occurred if their policy frameworks and vulnerabilities had not been changed (dashed line). The estimates here suggest that these countries were able to “save” about 4 percentage points of GDP during the crisis, thanks to their better preparations for confronting external shocks.
Figure 2 shows that various countries of the region had the room or “space” to apply countercyclical fiscal and monetary policies during this crisis. The figure depicts changes in interest rates (vertical axis) and in fiscal deficits (horizontal axis) for each country of the LAC region, where the colors group countries according to certain general characteristics and the diameter of the circles represent the relative size of each economy.
Filed under: Economic Crisis, Financial Crisis, Fiscal Stimulus | Tagged: Brazil, Caribbean, Chila, Colombia, commodity prices, countercyclical policies, Fiscal Stimulus, interest rates, Latin America, Mexico, Peru | 1 Comment »
Posted on October 1, 2009 by iMFdirect
The IMF has just published its latest forecast for the global economy, the World Economic Outlook. After a deep recession, global economic growth has turned positive, driven by wide-ranging, coordinated public intervention that has supported demand and reduced uncertainty and systemic risk in financial markets, according to the report.
“The recovery has started. Financial markets are healing,” says IMF Chief Economist Olivier Blanchard. But he warned the recovery will be slow. “The current numbers shuld not fool governments into thinking that the crisis is over,” he said.
The Fund also published its Global Financial Stability Report. It also sees a recovery, but much more needs to be done to heal the international financial system, including repairing bank balance sheets. Read the IMF Survey story.
Filed under: Economic Crisis, Financial Crisis, IMF | Tagged: capital markets, Fiscal Stimulus, Global Financial Stability Report, IMF forecast, recovery, World Economic Outlook | 1 Comment »
Posted on August 5, 2009 by iMFdirect
By Caroline Atkinson
After averting a second Great Depression, what should policy makers do to foster recovery?
Economic policymakers are rarely popular. Central bank governors are notorious for removing the punch bowl at the party. Ministers of finance are traditionally the ones who say no to their colleagues’ pet spending projects.
In the upside-down world of recent months, finance ministers and central bank governors around the world seemed to have switched sides. They became cheerleaders for expansionary policies. The IMF has argued strongly for this, as long as countries had room to take on more debt. Despite some hiccups, it seems clearer with every economic release that the extraordinary actions governments have taken have paid off, at least in halting the slide. Economic prospects may not be quite as bright as recent market moves would suggest. But the risk of spreading financial collapse has lessened markedly.
Filed under: Economic Crisis, Financial Crisis, Fiscal Stimulus, Multilateral Cooperation | Tagged: cooperation, deficits, expansionary policies, Fiscal Stimulus, GFSR, monetary stimulus, sustainable recovery | 1 Comment »