IMF: States policy should take into account economic growth and financial stability

International Monetary Fund (IMF) in 17 financial monitoring report pointed out that the current uncertainty of the global economic environment, national fiscal policy must be to develop short-term growth space to face the vulnerability of the economy and rebuild the long-term space enhance the stability of the financial balance between. Some analysts believe that this is a dilemma for many countries.

Overall, the financial risks still exist, but more than six months ago the situation has improved. In many developed countries, debt ratios are at historically high levels and rising loan demand is still very high, the financial market is still in a state of alert, the downside risks have not eliminated.

In 2009, the national deficit and debt levels have almost reached the high point, at present, have begun to fall, but the overall level of debt is still in a higher position.

According to the prediction of the IM F, this year, the deficit of all developed countries from GDP4.3% down to 2.5%, 107% of the national public debt levels will be of GDP. Emerging economies such as China, India, Russia and Brazil are expected deficit for this year's average of 2.1 percent of GDP, national debt will fall to 36 percent of GDP.

In the major developed countries, the proportion accounted for by the Japanese deficit this year will be up to 10% and 8.7% in 2013. Since 2009, Japan ranks among the highly indebted government. The next two years, Japan's public debt-GDP ratio increased to 35.8 and 241.1%, respectively, although still the highest in the developed economies, but the forecast has been lowered. Due to the low growth in the past 20 years and several rounds of expenditure to stimulate the economy, Japan is by far the highest in the world. The majority of Japanese government bonds purchased by the Japanese people. Japan is the traditional savings, and enable the Government to bear the debt burden that other countries can not afford.

2012, the United States is expected that the deficit will reach 8.1 percent of GDP, public debt levels to 107% of GDP. UK deficit will reach 8% of G DP, the level of public debt to GDP of 88%.

In Europe, the 2012 deficit would reach 3.2 percent of GDP, lower than the 6.2 percent in 2010, but higher than the euro area set target of 3%. Germany is the better a country. This year's deficit of 0.8 percent, down from 4.3 percent in 2010, public debt to GDP of 79%. French deficit was 4.6 percent lower than the high point of 7.6 percent in 2009. The national debt level of 89%.

Greece is heavily indebted countries of the euro area, under the strict control of the IM F and the European Union rescue the terms of the 2012 deficit is expected to reach 7.2 percent of GDP, have more than halved compared to 2009, the level of public debt to 153% of GDP. Italy and Spain is Europe's more awkward for the State. After years of economic stagnation, the Italian national debt will reach 123% of GDP deficit level is relatively low, at 2.4%. The IM F is expected to Italy the next two years are unable to achieve a balanced budget, at least until 2018, the 2013 debt balance than the Italian Government promised five years later. The Spanish Government has recently formed a budget crunch consensus, hoping to reduce Spain's deficit from 8.5% of GDP to 5.3 percent, down from 11.2 percent in 2009, the level of public debt reached 79 percent of GDP this year. However, the goal of the new budget may lead to more sluggish economic growth.

The IM F in the latest report has been to improve the prediction of the next two years the global economy, but economic growth is still very fragile. Many governments face is to improve the sustain economic growth and reduce the deficit debt to maintain the dual problem of financial and monetary stability.

The IMF believes that the national policy-makers face the dilemma of policy choices for this background, IM, F put forward some suggestions.

For countries with fiscal space, the recent fiscal adjustment plan should avoid the formation of pressure on economic activity and employment. Although the countries have sufficient fiscal space to consider slowing down the pace of recent adjustment to reduce down the risk of the economy, further economic slowdown in countries with fiscal space should be allowed to self-stabilization mechanism to the free-running to allow the increase in the deficit, avoid excessive financial constraints, so as not to undermine the economic environment. In the medium term public finance should not affect the sustainable development.

For emerging market economies this year, the fiscal adjustment will be slower. Slowdown in economic growth, should be considered, this slow down is appropriate. The medium term, before the erosion of fiscal space should be rebuilt in order to retain the flexibility of lower future economic development.

In the short term, many countries have unpredictable impact is still fragile, which makes them almost no space to fix the policy error. Although the major powers, the debt ratio is expected in 2015 is expected to stabilize, however, retrogression there is a risk, which limits the policy options.

Countries in the current recession, new research shows the negative impact of fiscal adjustment is huge due to the weak economy during the multiplier effect, multiplier to adjust the debt ratio in the high-end, fiscal policy can be postponed. Therefore, as long as the conditions allow, the gradual but steady policy adjustment is the best. The adjustment must be public confidence and trust.

The Government's policy flexibility in the short term, the longer-term. Need to reduce the debt ratio shows that very few countries have a long-term fiscal space, therefore, the medium-term adjustment program becomes necessary.

By Source: Economic Information Daily