Resolutions for the Fiscal New Year—Staying on Track Is No Easy Task

Posted on February 4, 2013 by iMFdirect

by Carlo Cottarelli and Philip Gerson

Version in Español and عربي

We’re one month into 2013, and if past experience is any guide, by now many people will have all but forgotten the promises they made about the things they planned to do over the coming year.

It’s a time-honored tradition in many countries for people to make resolutions at the New Year, usually involving things that are good for them, like achieving a healthier weight. Unfortunately, it’s also traditional that these commitments quickly fall by the wayside, only to be taken up again next year, usually with the same results.

But unlike many of these resolutions, the ones made by most advanced economies to reduce their 2012 fiscal deficits were by and large kept. The average headline deficit in these countries fell by about ¾ percent of GDP last year, bringing the cumulative deficit decline to 3 percent of GDP since budget shortfalls peaked in 2009. This is good news.

(more…)

Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: , , , , , , , , , , , | 2 Comments »

Fiscal Glass is Half Full: Some Reasons for Optimism

Posted on September 21, 2011 by iMFdirect

By Carlo Cottarelli

(Versions in عربي, Français, 中文 and  Русский)

In the midst of jittery financial markets, and global economic doom and gloom, it’s easy to become pessimistic. Perhaps too much so; amid what seems like a steady drum beat of bad news, one can lose sight of what has been  achieved over the last couple of years.

Public debt and fiscal deficits in many advanced economies remain very high. Nevertheless, important progress has been made in fiscal adjustment in many advanced economies. For most countries, government deficits have fallen substantially—by 2¼ percentage points of GDP on average compared to two years ago.


The fiscal outlook in most countries is stronger than we expected two years ago. (more…)

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

Euro Muscles in Brussels: Christine Lagarde on Greece

Posted on July 22, 2011 by iMFdirect

by iMFdirect

The head of the IMF Christine Lagarde was clear during her press conference in Brussels yesterday—European leaders’ deal to help Greece and the euro area is a very constructive and comprehensive package of measures to resolve debt problems.

“What to me is critical—really a game-changing decision—is the leaders’ commitment and determination to provide support to countries until they have regained market access, provided that they successfully implement their programs.”

Watch the press conference:

The 17 heads of state of the eurozone have agreed to provide €109 billion in fresh financing for Greece. Together with voluntary contributions from the private sector and continued support from the IMF, this will close the financing gap in Greece’s budget and give the country the breathing room it needs to restore growth and competitiveness.

Greece has not yet requested a new program from the IMF, but Lagarde said it was the global lender’s intention to be an active participant in helping Greece restore growth, debt sustainability and return to financial markets.

The European leaders also agreed to make the terms of the European Financial Stability Facility more flexible, a measure called for by the IMF in its recent assessment of the euro area.

“This flexibility is a key element, in the view of the IMF,” said Lagarde.

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

The Solution Is More, Not Less Europe

Posted on July 19, 2011 by iMFdirect

By Antonio Borges

(Versions in عربي,  中文, 日本語, Español, Français)

It is hard to hold the course in the middle of a storm, but European policymakers need to if they want European integration to succeed. The sovereign debt crisis is a serious challenge, which requires a strong and coordinated effort by all involved to finally put it behind us.

Surviving the storm will be of little consequence if the euro area finds itself trapped in the perpetual winter of low growth. Germany may be expanding at record speed right now, but it wasn’t so long ago when it grew much more slowly—just 1.5 percent per year between 1995 and 2007. In contrast, Sweden grew by 3 percent a year and the United States by 2 percent during the same period.

Many experts fear that without reforms, growth in Germany could drop even lower in the next 5‑10 years and beyond when global trade cools again. The situation is worse in the countries that currently find themselves in the eye of the storm.

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Filed under: Advanced Economies, Economic Crisis, Europe, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , | 17 Comments »

BRICs and Mortar—Building Growth in Low-Income Countries

Posted on May 9, 2011 by iMFdirect

By Dominique Desruelle and Catherine Pattillo

(Versions in 中文, Português, Español,  Русский)

The so-called BRIC nations—Brazil, Russia, India and China—could be a game changer for how low-income countries build their economic futures.  

The growing economic and financial reach of the BRICs has seen them become a new source of growth for low-income countries (LICs).

LIC-BRIC ties—particularly trade, investment and development financing—have surged over the past decade. And the relationship could take on even more prominence after the global financial crisis, with stronger growth in the BRICs and their demand for LIC exports helping to buffer against sluggish demand in most advanced economies.

The potential benefits from LIC-BRIC ties are enormous.

But, so too are challenges and risks that must be managed if the LIC-BRIC relationship to support durable and balanced growth in LICs. (more…)

Filed under: Emerging Markets, growth, International Monetary Fund, Low-income countries | Tagged: , , , , , , , , , , , , , , , , , , , , , | 5 Comments »

Avoiding Another Year of Living Dangerously: Time to Secure Financial Stability

Posted on April 13, 2011 by iMFdirect

By José Viñals

In various guises, the “Year of Living Dangerously” has been used to describe the global financial crisis, the policy response to the crisis, and its aftermath.

But, we’ve slipped well beyond a year and the financial system is still flirting with danger. Durable financial stability has, so far, proven elusive.

Financial stability risks may have eased, reflecting improvements in the economic outlook and continuing accommodative policies. But those supportive policies—while necessary to restart the economy—have also masked serious, underlying financial vulnerabilities that need to be addressed as quickly as possible. (more…)

Filed under: Advanced Economies, Emerging Markets, Financial Crisis, Financial regulation, Financial sector supervision, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , | 5 Comments »

Shifting Gears: Where the Rubber Meets the Fiscal Road

Posted on April 12, 2011 by iMFdirect

By Carlo Cottarelli

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. (more…)

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

By Carlo Cottarelli

(Version in Español)

As we said in the just-published Fiscal Monitor update, fiscal policy this year in some leading advanced economies is shaping up to be quite different from what was expected just last November.

The United States and Japan are delaying their earlier plans to reduce their public deficits, choosing instead to provide further support to their economies. The change in plans is even more remarkable if you look at the cyclically adjusted balance. You can see this in the charts. Some of the change in the fiscal stance with respect to our earlier projections is attributable to the somewhat better than projected fiscal results in 2010, a point to which I will return in a moment. Most of it, however, is due to additional stimulus measures introduced during the last two months. These two countries need to strengthen their fiscal adjustment credentials by detailing the measures they will adopt to lower deficits and debt over the medium term. (more…)

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

Balancing Fiscal Support with Fiscal Solvency

Posted on November 18, 2009 by iMFdirect

By Carlo Cottarelli

As I noted in my last post, government deficits in many countries—particularly in advanced countries—have jumped dramatically in the wake of the global crisis, and government debt has reached levels that could jeopardize longer term macroeconomic stability and growth. These countries will need to tighten fiscal policy significantly sometime down the road, especially where demographic trends are pushing up health and pension spending.

But fiscal deficits cannot be lowered in the immediate future. For the time being, fiscal (and monetary) policies must continue to support economic activity. The economic recovery is uneven and could be threatened by any premature withdrawal of policy support. Private demand is still unable to stand on its own two feet.

 This gives rise to a policy conundrum. How can we reconcile the competing requirements of  short-term support for the economy and longer term fiscal solvency?

(more…)

Filed under: Advanced Economies, Economic Crisis, Fiscal Stimulus, growth | Tagged: , , , , , , | 3 Comments »

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