Fiscal Monitor

Front Matter

Chapter 1: Navigating a Risky World
Fiscal positions have worsened significantly in the past year, with public debt ratios being revised upward in most countries. The revisions have been largest in emerging market and middle-income economies, where fiscal deficit ratios in 2015–16 are now expected to exceed the levels observed at the beginning of the global financial crisis. In advanced economies, the projected peak in public debt has been postponed once again by one year. The main forces driving the deterioration of debt dynamics are ongoing adjustments in the global economy. These lasting transformations include continued weakness in global activity, the decline in commodity prices, the slowdown in trade, and tighter financial conditions in emerging market and developing economies. All countries need to adapt to these new realities, but Chapter 1 shows that there is no one-size-fits-all solution. The appropriate policy response varies across countries and depends on the nature of the fiscal challenge they face.

Chapter 2: Fiscal Policies for Innovation and Growth
Productivity has moved to the top of the global policy agenda. The analysis in Chapter 2 shows that fiscal policy is a potent instrument for productivity growth through innovation. The analysis focuses on three channels of innovation: research and development (R&D), technology transfer, and entrepreneurship. The key policy messages are the following:
    • Governments in many countries should do more to promote R&D, for example, by     providing well-designed subsidies and tax incentives. If R&D were lifted by
    40 percent, GDP could rise by 5 percent in the long term.
    • In emerging market and developing economies, governments should invest in     education, infrastructure, and institutions to facilitate absorption of technologies     from advanced economies.
    • Fiscal policies to foster innovative entrepreneurship should be targeted to new     firms rather than small firms.

Methodological and Statistical Appendix

Back Matter