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### G-20 Countries: Fiscal Expansion — Executive summary and scale
- Fiscal deficits in both 2009 and 2010 are expected to be 5½ percent of GDP above their pre-crisis (2007) levels among the G-20.
- Crisis-related discretionary measures: -2.0 (2009) and -1.6 (2010) (PPP GDP-weighted averages, percent of GDP).
- Remaining change in fiscal balances driven primarily by automatic fiscal stabilizers and revenue losses associated with extraordinary declines in asset and commodity prices: other factors -3.5 (2009) and -3.8 (2010) (PPP GDP-weighted averages).
- Advanced G-20: overall balance changes -5.9 (2009) and -6.2 (2010); crisis-related discretionary measures -1.9 (2009) and -1.6 (2010); other factors -4.0 (2009) and -4.5 (2010).
- Emerging and Developing G-20: overall balance changes -5.0 (2009) and -4.4 (2010); crisis-related discretionary measures -2.2 (2009) and -1.6 (2010); other factors -2.8 (2009) and -2.8 (2010).
- Spending composition: spending represents more than three-quarters of stimulus planned for 2009, and around two-thirds in 2010.
- Tax stimulus: accounts for a little less than one-quarter of planned discretionary stimulus in the advanced G-20 for 2009; expenditure measures implemented more slowly.

### Implementation and reporting — country snapshots and utilization
- Implementation reporting is limited; payout rates vary:
  - United States: US$64 billion paid out through mid July (35 percent of the amount available); combined with over US$50 billion of tax breaks, 41 percent of the expected annual U.S. stimulus (US$283 billion) has been paid out, or 0.8 percent of GDP. Infrastructure spending payout: 1 percent of planned infrastructure spending has taken place.
  - Canada: 81 percent of the planned stimulus for 2009 has been committed (available to spend); commitment rates reported as 59 percent for an innovation initiative, 73 percent for infrastructure spending, and 95 percent for support to the unemployed.
  - France: 60 percent of planned 2009 stimulus has been paid out—full payout of tax credits and 26 percent payout of expenditures.
- Financial sector support announced vs. utilized (selected highlights):
  - PPP-weighted average G-20 allocation (percent of 2008 GDP): Capital Injection 2.2; Purchase of Assets and Lending by Treasury 3.5; Guarantees 8.8; Liquidity Provision and Other Support by Central Bank 9.3; Upfront Government Financing 3.6.
  - Advanced economies (percent of 2008 GDP): Capital Injection 3.4; Purchase of Assets and Lending by Treasury 5.3; Guarantees 14.0; Liquidity Provision and Other Support by Central Bank 6.9; Upfront Government Financing 5.5. In US$ (billions): 1,149 ; 1,937 ; 4,646 ; 2,514 ; upfront financing total 1,849.
  - Emerging economies (percent of 2008 GDP): Capital Injection 0.2; Purchase of Assets and Lending by Treasury 0.3; Guarantees 0.1; Liquidity Provision and Other Support by Central Bank 3.6; Upfront Government Financing 0.4. In US$ (billions): 223; 871; 1,605; 47.
  - Utilization rates (advanced-economy examples): average allocated capital injection 3.4 percent of GDP but utilized 1.4 percent of GDP (just over two-fifths), equivalent to US$425 billion; estimated utilization of purchase of assets and treasury lending is less than one-fifth of allocated amount.
- Reasons for limited utilization: precautionary initial announcements, improving bank liquidity and stability, lags in implementation of recapitalization and asset purchase programs, limited take-up of central bank facilities in many countries.

### Automatic stabilizers, other non-discretionary factors, and composition
- Advanced G-20 experience: larger overall fiscal expansion largely reflects larger automatic stabilizers (larger governments and greater deterioration of output gaps).
- Other factors include nondiscretionary revenue effects from extraordinary declines in commodity and real estate prices and financial sector profits, and some non-crisis-related discretionary measures.
- Emerging G-20 announced packages for 2009 tend to be larger on average than advanced G-20 and are more heavily weighted to infrastructure investment and less to income tax cuts.

### Impact of fiscal expansion on growth and fiscal multipliers
- Estimated growth impact (change in percentage points, year-on-year), ranges reflect uncertainty in fiscal multipliers and include spillovers:
  - G-20 total: 1.2 - 4.7 (2009); 0.1 - 1.0 (2010); average 0.7 - 2.8.
  - Advanced G-20: 1.3 - 4.4 (2009); 0.1 - 1.1 (2010); average 0.7 - 2.7.
  - Emerging market G-20: 1.1 - 5.0 (2009); 0.0 - 0.8 (2010); average 0.6 - 2.9.
- Multiplier assumptions used (low and high sets):
  - Low set: revenues 0.3; capital spending 0.5; other spending 0.3.
  - High set: revenues 0.6; capital spending 1.8; other spending 1.0.
- Box 1 (multipliers insights):
  - Structural models (e.g., GIMF) and empirical studies vary widely.
  - Increasing government spending (consumption or investment) tends to be more effective than cutting taxes.
  - GIMF multipliers: labor tax cuts and lump-sum transfers 0.2–0.5; government expenditure 1.6–3.9; targeted transfers 0.5–1.7.
  - Multipliers larger when monetary policy is accommodative (2 to 3 times larger in GIMF).
  - Coordinated fiscal action raises multipliers (example: multiplier of 3.7 for the United States under coordinated fiscal policy vs. 2.4 without coordination).
  - Lack of policy credibility lowers multipliers, possibly leading to negative effects if private saving offsets stimulus.

### Outlook, public debt, and medium-term challenges
- Debt ratios in advanced G-20 countries projected to widen by about 40 percentage points of GDP by 2014.
- G-20 aggregate public debt (gross) expectations: stabilize at around 85 percent of GDP between 2010 and 2014, about 23 percentage points above pre-crisis level.
- Advanced economies: debt levels expected to rise to close to 120 percent of GDP (up from about 80 percent pre-crisis).
- Emerging G-20: debt levels expected to decline slightly after initial post-crisis peak, reflecting positive primary balances after 2012 and stronger projected growth.
- Staff projection assumptions for fiscal balance recovery:
  - Withdrawal of stimulus of 1.6 percent of GDP in 2010.
  - Structural fiscal adjustment during 2011–14 of 2½ percentage points of GDP in advanced G-20 countries and about 1 percentage point in emerging market G-20 countries.
- Even with projected improvements, overall fiscal deficits remain higher in 2014 compared with 2007 by around 2½ percentage points of GDP for advanced G-20 and 1½ percentage points for emerging markets (staff projections include significant structural fiscal adjustment during 2011–14 beyond withdrawal of stimulus).
- Policy recommendation: continue fiscal support until recovery established, but identify and articulate clear medium-term fiscal solvency strategies to enhance stimulus effectiveness and limit risk of rising interest rates and risk premiums.

### Fiscal impact outside the G-20 and emerging-market constraints
- Smaller advanced countries (non-G-20) projected increases in overall fiscal deficits: 7.8 percentage points of GDP in 2009 and 8.8 percentage points in 2010 (with respect to 2007), larger than advanced G-20 increases.
- Higher primary spending explains just under 60 percent of the expansion in deficits in these smaller advanced countries.
- Emerging and developing countries: fiscal deficits projected to increase by 4.6 percentage points of GDP on average in 2009 compared to 2007, with gradual recovery from 2010.
- Drivers in emerging markets: sharp decline in revenues (including from lower commodity prices) not fully matched by lower spending; many entered crisis with constrained fiscal space.
- Only a handful of non-G-20 emerging markets announced stimulus plans for 2009 (Armenia, Costa Rica, Guatemala, Peru, the Philippines, and Vietnam); Fund and other financing helps ease near-term adjustment for some.

### Financial-sector support details and utilization (selected table figures)
- Appendix Table 3 (G-20 averages, percent of 2008 GDP): Capital Injection 2.2; Purchase of Assets and Lending by Treasury 3.5; Guarantees 8.8; Liquidity Provision and Other Support by Central Bank 9.3; Upfront Government Financing 3.6.
- Selected country examples (percent of 2008 GDP, columns A/B/C/D/E):
  - Canada: A 0.0, B 10.9, C 13.5, D 1.5, E 10.9.
  - United States: A 5.2, B 1.3, C 10.9, D 8.4, E 6.7.
  - United Kingdom: A 3.9, B 13.8, C 49.7, D 14.4, E 20.0.
  - Japan: A 2.4, B 21.2, C 7.3, D 2.9, E 0.8.
  - China: A 0.0, B 0.0, C 0.0, D 21.3, E 0.0.
- Appendix Table 4 utilization examples (amount used, percent of announcement):
  - Canada (Capital Injection): amount used 5.6, percent of announcement 51.6.
  - United States (Capital Injection): amount used 2.2, percent of announcement 41.9; Purchase of Assets and Lending by Treasury amount used 0.7, percent 53.8.
  - United Kingdom (Capital Injection): amount used 3.9, percent 100.0; Purchase of Assets and Lending by Treasury amount used 3.4, percent 24.4.
  - Japan (Capital Injection): amount used 0.0, percent 1.0; Purchase of Assets and Lending by Treasury amount used 0.8, percent 3.6.
  - PPP-weighted average utilization (G-20): Capital Injection 1.1 (percent of 2008 GDP); In percent of announcement 41.8. Purchase of Assets and Lending by Treasury 0.9; In percent of announcement 18.9.

### Market perceptions, sovereign risk, and emerging market financing conditions
- Emerging market bond spreads over U.S. debt increased in Q2 2009 by about 40 basis points, returning the EMBI spread to around 400 bp (pre-crisis levels).
- CDS spreads in emerging economies reduced sharply from the beginning of Q2 but saw an uptick in recent weeks; correlation of CDS spreads between emerging markets and advanced economies is about 0.85.
- Government bond yields in major advanced economies trended upward since early 2009 (with some easing recently); long-end yields remain below pre-crisis levels in many countries.
- Drivers of yield movements: normalization of market risk appetite, pickup in inflationary expectations, increase and widening of term premiums (2 to 10-year spreads), concerns about central bank balance sheets and potential public debt monetization.
- CDS spreads in advanced economies showed an uptick in recent weeks after an earlier marked decline; uptick may reflect ratings agency moves and concerns about public debt despite continued declines in corporate CDS spreads.

### Timing, scale, and composition of required fiscal adjustment — illustrative objectives
- Policymakers face two competing risks: premature withdrawal of stimulus risking the recovery; delayed withdrawal increasing investor concerns about sustainability and higher interest rates.
- Illustrative objectives (starting from projected 2014 debt levels):
  - For advanced economies with projected debt-to-GDP below 60 percent in 2014 (6 countries) and emerging market countries below 40 percent (9 countries): stabilize the debt-to-GDP ratio from 2014 onward.
  - For countries above thresholds: from 2014, reduce debt-to-GDP ratios gradually over 15 years to 60 percent by 2029 for advanced economies (halve the debt for Japan) (16 countries) and to 40 percent for emerging market economies (10 countries).
- Assumption for illustrative calculations: a difference between the real interest and real growth rates of one percentage point from 2014 onward.
- Illustrative average required improvements in the primary balance (from prevailing 2014 levels):
  - Advanced economies (higher-debt group): improvement by 5.4 percentage points of GDP; lower-debt group: no improvement needed.
  - Emerging market higher-debt economies: improvement by 0.8 percentage points of GDP; lower-debt group: no improvement needed.
- Sensitivity (Box 3): with a 1 percentage point interest-growth differential, higher-debt advanced economies would need a primary surplus of 4½ percent of GDP from 2014 onward to meet gradual debt-reduction objectives; with zero differential required surplus 3½ percent of GDP; with a 2 percentage point differential required surplus 5½ percent of GDP.

### Aging, health care pressures, and institutional responses
- Europe (EC Ageing Report projections, assuming no policy changes):
  - Pension, health, and long-term care spending expected to grow by about 0.5 percent of GDP up to 2015 (vs 2007), accelerate after 2015, and rise by 1.9 percent of GDP over 2015–30 and by a further 2.9 percent of GDP between 2030 and 2060.
  - Component changes (vs 2007): pension +0.2 (to 2015), +1.1 (2015–30), +1.1 (2030–60); health care +0.2 (to 2015), +0.5 (2015–30), +1.0 (2030–60); long-term care +0.1 (to 2015), +0.3 (2015–30), +0.8 (after 2030); education -0.3 (to 2015), -0.1 (to 2030), +0.2 thereafter; overall through 2060 -0.2.
  - Alternative scenarios: additional non-demographic health care expenditures could range from 2½ to 4½ percent of GDP by 2060.
- United States (CBO long-term projections, assuming no change in current legislation):
  - Social security plus health care projected to grow by 0.5 percent of GDP by 2015, an additional 4.2 percent of GDP between 2015 and 2030, and 5.1 percent of GDP between 2030 and 2060.
  - Medicaid and Medicare account for bulk: +3.2 percent of GDP in 2015–30 and +5.2 percent in 2030–60.
  - Social security projected to step up by 1 percent of GDP in 2015–30 and stabilize thereafter at about 6 percent of GDP.
- Institutional recommendations for solvency:
  - (i) firm commitment and clear strategy to contain aging-related spending;
  - (ii) growth-enhancing structural reforms;
  - (iii) fiscal policies within medium-term fiscal frameworks and supportive institutional arrangements (e.g., medium-term expenditure frameworks, formal commitments, disclosure of contingent liabilities).

### Fiscal risks, reporting, and sovereign balance sheets
- The crisis highlighted the importance of fiscal risks; several countries have begun issuing annual Statements of Fiscal Risks covering macro shocks, natural disasters, and contingent liabilities.
- Recent measures (liquidity provision, lending, recapitalization, asset purchases) have limited impact on deficits to date but pronounced effects on sovereign balance sheets (government equity holdings, central bank claims, increased contingent liabilities via guarantees).
- Recommendation: prepare sovereign balance sheets and improve disclosure of contingent obligations to preserve fiscal solvency.

### Preliminary country strategies (staff views of authorities' intentions — selected)
- Argentina: Nonrenewal of stimulus.
- Australia: Target of running surpluses on average over the cycle; return to surplus projected by 2015–16; nonrenewal of stimulus; hold real growth in spending to 2 percent per annum until budget returns to surplus.
- Brazil: 3-year budget projection with primary surplus targets implying declining debt ratio; nonrenewal of stimulus; improved tax compliance.
- Canada: Return to surplus in 2013/14 projected; nonrenewal of stimulus; medium-term spending return to 2007–08 share of GDP.
- China: Nonrenewal of stimulus.
- France: Nonrenewal of stimulus; spending restraint once recovery underway.
- Germany: Constitutional fiscal rule — structural deficit ceiling 0.35 percent of GDP for FG from 2015; states structurally balanced from 2020; nonrenewal of stimulus.
- Japan: Halve the primary deficit (excl. social security fund) within five years; achieve primary balance within ten; stabilize debt-to-GDP by mid 2010s and place on downward path early 2020s; nonrenewal of stimulus; higher consumption taxes and savings on health care and public administration.
- United Kingdom: Annual average fiscal consolidation of 1⅓ percent of GDP from 2010 to 2014, so debt begins to decline by 2015–16; nonrenewal of stimulus.
- United States: Stabilization of debt ratio through 2019 (projection); nonrenewal of most stimulus; proposed reintroduction of statutory PAYGO rules.
- (Table 8 notes: staff views of authorities' intentions; some entries are projections rather than targets.)

### Appendix — selected fiscal and debt numeric highlights (Appendix Table 1 and Appendix Table 2 excerpts)
- Appendix Table 1 — Overall Fiscal Balance (percent of GDP), selected entries (2007, 2009, 2010, 2014):
  - Argentina: 2007 -2.2, 2009 -3.3, 2010 -1.5, 2014 -0.4.
  - Australia: 2007 1.5, 2009 -4.3, 2010 -5.3, 2014 -1.3.
  - Brazil: 2007 -2.5, 2009 -3.2, 2010 -1.3, 2014 -1.3.
  - Canada: 2007 1.6, 2009 -4.2, 2010 -3.7, 2014 0.5.
  - China: 2007 0.9, 2009 -4.3, 2010 -4.3, 2014 -1.0.
  - France: 2007 -2.7, 2009 -7.4, 2010 -7.5, 2014 -5.2.
  - Germany: 2007 -0.5, 2009 -4.6, 2010 -5.4, 2014 -0.5.
  - India: 2007 -5.2, 2009 -9.8, 2010 -8.4, 2014 -4.6.
  - Italy: 2007 -1.5, 2009 -5.9, 2010 -6.3, 2014 -4.8.
  - Japan: 2007 3/ -2.5, 2009 -10.3, 2010 -10.3, 2014 -7.6.
  - United Kingdom: 2007 -2.6, 2009 -11.6, 2010 -13.3, 2014 -6.9.
  - United States: 2007 5/ -2.9, 2009 -13.5, 2010 -9.7, 2014 -4.7.
  - G-20 aggregate: 2007 -1.1, 2009 -8.1, 2010 -6.9, 2014 -3.1.
  - Advanced G-20 Countries: 2007 -1.9, 2009 -10.2, 2010 -8.7, 2014 -4.3.
  - Emerging Market G-20 Countries: 2007 0.2, 2009 -4.9, 2010 -4.2, 2014 -1.2.
- Appendix Table 1 — General Government Debt (Gross, percent of GDP), selected entries (2007, 2009, 2010, 2014):
  - Argentina: 2007 67.9, 2009 50.4, 2010 50.6, 2014 48.4.
  - Australia: 2007 8.5, 2009 13.7, 2010 19.1, 2014 25.9.
  - Brazil: 2007 67.7, 2009 70.1, 2010 68.5, 2014 62.2.
  - Canada: 2007 64.2, 2009 75.6, 2010 76.6, 2014 65.4.
  - China: 2007 20.2, 2009 20.9, 2010 23.4, 2014 21.3.
  - France: 2007 63.8, 2009 77.4, 2010 83.8, 2014 95.5.
  - Germany: 2007 63.6, 2009 79.8, 2010 86.8, 2014 91.4.
  - India: 2007 80.5, 2009 83.7, 2010 85.0, 2014 73.4.
  - Italy: 2007 103.5, 2009 117.3, 2010 123.2, 2014 132.2.
  - Japan: 2007 187.7, 2009 217.4, 2010 226.2, 2014 239.2.
  - United Kingdom: 2007 44.1, 2009 68.6, 2010 82.2, 2014 99.7.
  - United States: 2007 63.1, 2009 88.9, 2010 99.8, 2014 112.0.
  - G-20 aggregate: 2007 62.4, 2009 76.1, 2010 82.1, 2014 86.6.
  - Advanced G-20 Countries: 2007 78.8, 2009 100.6, 2010 109.7, 2014 119.7.
  - Emerging Market G-20 Countries: 2007 37.5, 2009 38.8, 2010 40.2, 2014 36.4.
- Appendix Table 2 — Fiscal expansion and crisis-related discretionary measures (change vs 2007, percent of GDP), PPP GDP-weighted averages:
  - Overall balance change: 2009 -5.5; 2010 -1.6.
  - Crisis-related discretionary measures: 2009 -2.0; 2010 -1.6.
  - Other factors: 2009 -3.5; 2010 -3.8.

### Appendix Table 5 — Debt and primary balance (methodology and selected country rows)
- Purpose: average primary balance needed to stabilize debt at end-2014 level if debt < 60 percent (advanced) or < 40 percent (emerging) or to bring debt to 60 percent (halve for Japan) / 40 percent for emerging by 2029.
- Simplifying assumptions: post-2014 interest–growth differential of 1 percent; passive scenario based on constant policies.
- Selected advanced-economy illustrative rows (sample figures as shown):
  - Japan: debt entries 194.2 189.6 ... 217.4 239.2 ... required adjustments indicating larger needed adjustments (table shows Japan with entries including -9.0 -5.1 9.8 in the presented row).
  - United Kingdom: entries 42.9 42.5 ... 68.6 99.7 ... with illustrative adjustment needs included in the table rows.
- Selected emerging-economy illustrative rows (sample figures as shown):
  - China: entries 13.4 11.2 ... 20.9 21.3 ... with illustrative primary-balance implications.
  - Russia: entries 3.9 2.3 ... 7.3 7.3 ... showing different debt dynamics.
- Illustrative policy implication: required average primary balance to stabilize or reduce debt depends critically on current debt levels and assumed interest-growth differential; higher debt and larger differentials raise required adjustments substantially.

*Source: IMF Fiscal Affairs Department — Cross-Country Fiscal Monitor (based on July 2009 WEO Update) and IMF staff estimates and analysis, as presented in the supplied PDF chapter/section.*

### 1. G-20 Countries: Fiscal Expansion ....................................................................................

### 1. G-20 Countries: Fiscal Expansion

### Executive summary
- The global crisis is having a dramatic impact on fiscal positions around the world; among the G-20, fiscal deficits in both 2009 and 2010 are expected to be 5½ percent of GDP above their pre-crisis (2007) levels.
- Crisis-related discretionary measures are estimated at 2 percent of GDP in 2009 and 1.6 percent of GDP in 2010; the remainder of the change in fiscal balances reflects primarily automatic fiscal stabilizers and revenue losses associated with extraordinary declines in asset and commodity prices.
- Tax stimulus measures account for a little less than one-quarter of planned discretionary stimulus this year in the advanced G-20 and were implemented relatively quickly; expenditure measures have proceeded more slowly.
- Government support to financial and other sectors has been sizable, but actual disbursements have generally been well below announced program ceilings.
- Debt ratios in the advanced G-20 countries are projected to widen by about 40 percentage points of GDP by 2014.
- Fiscal policy should continue to support economic activity until recovery has taken hold; identification of clear medium-term fiscal solvency strategies would enhance the effectiveness of stimulus and limit the risk of rising interest rates and risk premiums.

### Fiscal response in the G-20: scale and composition
- PPP GDP-weighted average change in overall balance (with respect to 2007): -5.5 (2009) and -5.5 (2010).
- PPP GDP-weighted average crisis-related discretionary measures: -2.0 (2009) and -1.6 (2010).
- PPP GDP-weighted average other factors: -3.5 (2009) and -3.8 (2010).
- Advanced countries: overall balance changes of -5.9 (2009) and -6.2 (2010); crisis-related discretionary measures -1.9 (2009) and -1.6 (2010); other factors -4.0 (2009) and -4.5 (2010).
- Emerging and Developing G-20: overall balance changes of -5.0 (2009) and -4.4 (2010); crisis-related discretionary measures -2.2 (2009) and -1.6 (2010); other factors -2.8 (2009) and -2.8 (2010).
- Spending represents more than three-quarters of stimulus planned for 2009, and around two-thirds in 2010 (reflecting project completion and phased implementation).
- Emerging G-20 countries have, on average, announced somewhat larger stimulus packages for 2009 than advanced G-20 countries; these packages are more heavily weighted to infrastructure investment and less focused on income tax cuts.

### Implementation and reporting
- Comprehensive assessment of implementation is difficult due to limited public reporting by many governments.
- United States: US$64 billion paid out through mid July (35 percent of the amount available); combined with over US$50 billion of tax breaks, 41 percent of the expected annual U.S. stimulus (US$283 billion) has been paid out, or 0.8 percent of GDP. Infrastructure spending payout: 1 percent of planned infrastructure spending has taken place.
- Canada: 81 percent of the planned stimulus for 2009 has been committed (available to spend); commitment rates reported as 59 percent for an innovation initiative, 73 percent for infrastructure spending, and 95 percent for support to the unemployed.
- France: 60 percent of planned 2009 stimulus has been paid out—full payout of tax credits and 26 percent payout of expenditures.
- Speed of spending is affected by budgetary allocation procedures, transfers to subnational governments, procurement, and payment to contractors; “shovel ready” projects may still face startup delays.

### Automatic stabilizers and other non-discretionary factors
- Advanced G-20 experience: more sizable overall fiscal expansion largely reflects larger automatic stabilizers, reflecting larger governments (e.g., revenue-to-GDP ratios) and greater deterioration of output gaps.
- Other factors include nondiscretionary revenue effects linked to extraordinary declines in commodity and real estate prices and financial sector profits, as well as some non-crisis-related discretionary measures.

### Impact of fiscal expansion on growth
- Estimated growth impact ranges (change in percentage points, with respect to the previous year):
  - G-20 total: 1.2 - 4.7 (2009); 0.1 - 1.0 (2010); average 0.7 - 2.8.
  - Advanced G-20 countries: 1.3 - 4.4 (2009); 0.1 - 1.1 (2010); average 0.7 - 2.7.
  - Emerging market G-20 countries: 1.1 - 5.0 (2009); 0.0 - 0.8 (2010); average 0.6 - 2.9.
- Ranges reflect uncertainty in fiscal multipliers; estimates account for spillovers to other countries via imports and reflect the impact of the full fiscal expansion (not only discretionary stimulus).
- The low multiplier set used: 0.3 on revenues, 0.5 on capital spending, 0.3 on other spending. The high set used: 0.6 on revenues, 1.8 on capital spending, 1 on other spending.
- For Russia and Saudi Arabia, growth-impact calculations used changes in non-oil revenues (rather than total revenues); for Saudi Arabia, discretionary measure changes were used rather than total expenditures; for the United States and Japan, losses from financial sector support were excluded from certain estimates.

### Fiscal multipliers: key insights (from Box 1)
- Multipliers vary widely by methodology and country circumstances; structural models (e.g., GIMF) and empirical studies produce differing ranges.
- Increasing government spending (consumption or investment) tends to be more effective than cutting taxes in stimulating output.
- GIMF multipliers: low for labor tax cuts and lump-sum transfers (0.2–0.5); high for government expenditure (1.6–3.9) and targeted transfers (0.5–1.7).
- Multipliers are larger when monetary policy is accommodative (2 to 3 times larger in GIMF with accommodative monetary policy).
- Coordinated fiscal action across countries raises multipliers (example: GIMF finds multiplier of 3.7 for the United States under coordinated fiscal policy vs. 2.4 without coordination).
- Lack of policy credibility lowers multipliers by increasing risk premia and real interest rates; in extreme cases, fiscal expansion can negatively affect output by inducing offsetting increases in private saving.

### Outlook and policy challenges
- Fiscal balances are expected to improve as the global economy recovers, but public debt outlook is worrisome in many countries.
- Debt ratios in advanced G-20 countries are projected to widen by about 40 percentage points of GDP by 2014—an increase not seen since the Second World War.
- Fiscal policy should continue to support activity until recovery is established; additional discretionary stimulus may be needed in 2010.
- The positive growth impact of fiscal expansion would be enhanced by clear strategies to ensure medium-term fiscal solvency; few countries have articulated such strategies in adequate detail.
- Without credible medium-term strategies, rising interest rates and risk premiums could erode the effectiveness of stimulus measures.

*Source: IMF Fiscal Affairs Department — Cross-Country Fiscal Monitor (based on July 2009 WEO Update).*

### 6.      The crisis has also affected fiscal balances of countries outside the G-20.

### 6.      The crisis has also affected fiscal balances of countries outside the G-20.

### Fiscal impact outside the G-20
- Projected increases in overall fiscal deficits in smaller advanced countries of 7.8 percentage points of GDP in 2009 and 8.8 percentage points in 2010 (both with respect to 2007) are larger than in the advanced G-20 (5.9 and 6.2 percentage points of GDP in 2009 and 2010, respectively).
- Higher primary spending explains just under 60 percent of the expansion in deficits in these smaller advanced countries.
- Fiscal deficits of emerging and developing countries are projected to increase by 4.6 percentage points of GDP on average in 2009 compared to pre-crisis levels in 2007, with a gradual recovery from 2010.

### Emerging market and developing countries: drivers and constraints
- Much of the increase in fiscal deficits in emerging market and developing countries reflects a sharp decline in revenues (including due to lower commodity prices), not fully matched by lower spending.
- In a sample of 22 non-G-20 emerging market countries, output gaps are estimated to turn from a PPP GDP-weighted average of 2.5 percent of potential output in 2008 to -0.9 percent in 2009 and to -2.4 percent in 2010.
- Some countries entered the crisis with relatively sound fundamentals and room to allow automatic stabilizers to operate or to use discretionary stimulus; most, however, have faced significant constraints.
- Several countries benefited from buoyant tax collections in recent years and sharply increased their spending; when conditions changed, revenue gains slowed but spending growth continued, making expenditure levels difficult to sustain.
- Only a handful of countries from this group have announced stimulus plans for 2009 (these countries are Armenia, Costa Rica, Guatemala, Peru, the Philippines, and Vietnam).
- Financing from the Fund and others is helping some of these countries ease the burden of adjustment in the near term.

### Measures to support financial and other sectors
- Governments and central banks continued to provide direct support to the financial and other sectors.
- Guarantees do not require upfront government financing; institutions providing other support measures are generally outside the government sector (central banks, state-owned financial institutions, and special corporations).
- Upfront government financing needs connected with financial support operations are estimated at 5.5 percent of GDP for the advanced G-20 countries and 0.4 percent of GDP for the emerging G-20 countries (as of June 2009; announced or pledged amounts).
- Table 4 (summary of announced or pledged amounts, columns indicate announced or pledged amounts, not actual uptake):
  - G-20 average: Capital Injection 2.2, Purchase of Assets and Lending by Treasury 3.5, Guarantees 8.8, Liquidity Provision and Other Support by Central Bank 9.3, Upfront Government Financing 3.6 (in percent of 2008 GDP).
  - Advanced Economies: Capital Injection 3.4, Purchase of Assets and Lending by Treasury 5.3, Guarantees 14.0, Liquidity Provision and Other Support by Central Bank 6.9, Upfront Government Financing 5.5 (in percent of 2008 GDP); in billions of US$: 1,149; 1,937; 4,646; 2,514; 1,849.
  - Emerging Economies: Capital Injection 0.2, Purchase of Assets and Lending by Treasury 0.3, Guarantees 0.1, Liquidity Provision and Other Support by Central Bank 3.6, Upfront Government Financing 0.4 (in percent of 2008 GDP); in billions of US$: 223; 871; 1,605; 47.
- Support figures refer to announced (or pledged) amounts; Appendix Table 3 provides country-by-country information.

### Utilization of announced financial sector support
- Financial sector support provided by governments so far has generally been considerably less than originally announced.
- For advanced economies with available data:
  - Average amount allocated for capital injection was 3.4 percent of GDP, but amount utilized so far has been 1.4 percent of GDP (just over two-fifths of allocated amount), equivalent to US$425 billion.
  - Estimated utilization rate for the purchase of assets and treasury lending is less than one-fifth of the allocated amount.
- Limited utilization reflects factors including precautionary nature of initial announcements, indications of increasing stability and improved bank liquidity, and lags in implementation of recapitalization and asset purchase programs.
- Central bank credit facilities also appear to have been taken up only to a limited extent in many countries.

### Prospects for recovery of fiscal positions
- Fiscal balances are expected to strengthen gradually over the medium term but deficits are likely to remain well above their 2007 levels.
- Overall fiscal deficits remain higher in 2014, compared with 2007, by around 2½ percentage points of GDP for the advanced G-20 countries and 1½ percentage points for emerging markets (staff projections include significant structural fiscal adjustment during 2011–14 beyond withdrawal of stimulus).
- Staff projections incorporate:
  - Withdrawal of stimulus of 1.6 percent of GDP in 2010.
  - Structural fiscal adjustment during 2011–14 of 2½ percentage points of GDP in advanced G-20 countries and about 1 percentage point in emerging market G-20 countries.
- For the advanced countries, larger overall deficits are explained by higher interest payments (by 1.7 percentage points of GDP, on average) and higher primary expenditures.
- For emerging markets, deterioration is explained by primary spending increases, with revenue gains in some countries offsetting sustained lower commodity revenues in others.
- The ultimate fiscal costs of the crisis could be larger if adjustment policies are not put in place or if downside risks materialize.

### Public debt outlook
- Public debt is expected to continue to rise in advanced economies.
- Debt ratios in the G-20 countries as a whole are expected to stabilize at around 85 percent of GDP between 2010 and 2014, about 23 percentage points above the pre-crisis level.
- In advanced economies, debt levels are expected to rise to close to 120 percent of GDP, up from about 80 percent of GDP before the crisis.
- In emerging market G-20 countries, debt levels are expected to decline slightly after the initial post-crisis peak, reflecting positive primary balances after 2012, lower interest spending than in advanced G-20 economies, and stronger projected economic growth.

### Aging and health care spending pressures (Box 2)
- In Europe (EC Ageing Report projections, assuming no policy changes):
  - Pension, health, and long-term care spending in the European Union expected to grow by about 0.5 percent of GDP over the period up to 2015 (compared to 2007), accelerating after 2015.
  - These expenditures projected to rise by 1.9 percent of GDP over 2015–30 and by a further 2.9 percent of GDP between 2030 and 2060.
  - Specific components:
    - Pension expenditure: +0.2 percent of GDP by 2015 (vs 2007); +1.1 percent of GDP over 2015–30; +1.1 percent of GDP over 2030–60.
    - Health care spending: +0.2 percent of GDP over 2007–15; +0.5 percent of GDP over 2015–30; +1 percent of GDP over 2030–60.
    - Long-term care spending: +0.1 percent of GDP by 2015; +0.3 percent of GDP over 2015–30; +0.8 percent of GDP after 2030.
    - Education spending: -0.3 percent of GDP by 2015; further -0.1 percent of GDP to 2030; +0.2 percent of GDP thereafter; overall change through 2060 is -0.2 percent of GDP.
  - EC notes upward risks, especially from health care spending due to higher relative prices, wider availability of high-tech treatments, and greater demand from an expanding elderly population; in alternative scenarios, additional health care expenditures from non-demographic factors could range from 2½ to 4½ percent of GDP by 2060.
- In the United States (CBO long-term projections, assuming no change in current legislation):
  - Social security plus health care projected to grow by 0.5 percent of GDP by 2015, an additional 4.2 percent of GDP between 2015 and 2030, and 5.1 percent of GDP between 2030 and 2060.
  - Bulk of increase accounted for by Medicaid and Medicare: +3.2 percent of GDP in 2015–30 and +5.2 percent in 2030–60.
  - Social security spending projected to step up by 1 percent of GDP in 2015–30 but stabilize thereafter at about 6 percent of GDP.

### Market perception of sovereign risk
- Upward trend in government bond yields in major advanced economies since early 2009, though yields eased somewhat in recent weeks and the long end of the yield curve remains below pre-crisis levels in many countries.
- Drivers of yield movements include:
  - Move back to more normal levels of market appetite for risk as decline in economic activity moderated and financial sector conditions began to stabilize.
  - Pickup in inflationary expectations (e.g., difference in yields on U.S. government bonds and TIPS yields).
  - Increase and widening of term premiums (2 to 10-year yield spreads), possibly reflecting large issuances and credit rating agency moves.
  - Concerns about size of central bank balance sheets and possible public debt monetization could weigh on market perceptions of sovereign risk going forward.
- CDS spreads in advanced economies showed an uptick in recent weeks after an earlier marked decline; recent uptick occurred even as corporate CDS spreads continued declining and may relate in part to ratings agency moves and concerns about public debt.

*Source: IMF staff estimates and analysis, based on the July 2009 WEO Update and related IMF staff work.*

### 14.      The spread of emerging market bonds over U.S. debt also increased in the

### _spn0921 - 14.      The spread of emerging market bonds over U.S. debt also increased in the

### Emerging market financing conditions and contagion
- The spread of emerging market bonds over U.S. debt increased in the second quarter of 2009 by about 40 basis points, returning the EMBI spread to pre-crisis levels of around 400 bp.
- CDS spreads in emerging economies, after a sharp reduction from the beginning of the second quarter, have seen an uptick in recent weeks, reflecting concerns about access to market financing and developments in advanced countries.
- CDS spreads in emerging markets are highly correlated with those in advanced economies: the correlation is about 0.85.

### Policy challenges going forward: overview
- Sharp increase in government debt complicates management of preexisting challenges from population aging, especially in advanced economies.
- The increase in debt ratios projected for advanced economies is the largest since World War II.
- Governments have taken on large contingent liabilities—guarantees and other commitments to future expenditures—that may materialize.
- Prospective costs from pensions and health care together could amount to more than ten times the costs of the crisis.
- Fiscal adjustment will therefore be needed in the post-crisis environment, anchored by supporting institutional arrangements.

### Timing and tradeoffs of fiscal adjustment
- Policymakers must balance two competing risks:
  - A too hasty withdrawal of fiscal stimulus would risk nipping a recovery in the bud.
  - A delayed withdrawal may increase investor concerns about sustainability, leading to higher interest rates and the risk of snowballing debt.
- At this stage (as of the report), with recovery not yet underway and likely to occur at different times in different countries, fiscal adjustment is premature.

### Scale of fiscal adjustment required (method and illustrative objectives)
- To halt or reverse increases in debt-to-GDP ratios, sizable improvements in primary balances will be required in most advanced and several emerging market economies.
- Objectives (starting from projected 2014 debt levels):
  - For (i) advanced economies whose debt-to-GDP ratios are projected below 60 percent in 2014 (6 countries), and (ii) emerging market countries whose debt-to-GDP ratios are projected below 40 percent (9 countries): stabilize the debt-to-GDP ratio from 2014 onward.
  - For countries above these thresholds: beginning in 2014, reduce debt-to-GDP ratios gradually over 15 years to 60 percent by 2029 for the advanced economies (halve the debt for Japan) (16 countries) and to 40 percent for the emerging market economies (10 countries).
- Assumption used in illustrative calculations: a difference between the real interest and real growth rates of one percentage point from 2014 onward.
- Illustrative average required improvements in the primary balance (from prevailing 2014 levels):
  - For the advanced economies: an improvement in the primary balance prevailing in 2014 by 5.4 percentage points for the higher-debt group; no improvement would be needed for the lower-debt group.
  - For the emerging market countries: an improvement in the 2014 primary balance by 0.8 percentage points of GDP for the higher debt economies; no improvement would be needed for the lower-debt group.
- Despite limited need for fiscal adjustment for some emerging markets by this yardstick, some emerging market countries may nevertheless face refinancing challenges in the current global financial environment.
- Estimates for individual countries reveal wide variation in the need for adjustment (see Appendix Table 5 in the source).

### Sensitivity to growth and interest-rate developments (Box 3)
- Under an interest-growth differential of one percentage point, the higher-debt advanced economies would need to attain a primary surplus of 4½ percent of GDP from 2014 onward to achieve the gradual debt-reduction objectives described.
- With a zero differential, the required surplus would amount to 3½ percent of GDP.
- With a differential amounting to two percentage points, a surplus as high as 5½ percent of GDP would be needed.
- The impact of the differential on the need for adjustment is greater (in percentage points of GDP) the higher the debt-to-GDP ratio.
- Historical context:
  - An interest-growth differential in the range of 0–1 percentage points in 2014–29 would not be unusual by historical standards.
  - A 2-percentage point differential would be more pessimistic, but still plausible.
  - The average (long-term) interest-growth differential in the main advanced countries rarely exceeded 2 percentage points in 15-year periods during the past one and a half centuries, whereas negative differentials were experienced during the oil price shocks of the 1970s.

### Aging-related spending and structural pressures
- Requisite fiscal adjustment is made more demanding by pressures in pensions and health care.
- Under current policies, spending on pensions and health care is projected to increase substantially over the next two decades in several countries, especially the advanced economies.
- Owing to these pressures, attaining a given primary surplus presents challenges that were not experienced to the same extent in the past.

### Fiscal adjustment strategy and institutional features
- A strategy to ensure fiscal solvency should be based on:
  - (i) a firm commitment and a clear strategy to contain aging-related spending, especially in advanced economies;
  - (ii) growth-enhancing structural reforms; and
  - (iii) fiscal policies cast within medium-term fiscal frameworks (and supportive institutional arrangements) that envisage a gradual fiscal correction once economic conditions improve.
- Institutional features likely to anchor fiscal adjustment include:
  - A formal commitment to medium-term fiscal consolidation, with appropriate flexibility for output shocks.
  - Procedures for identifying and disclosing the public sector’s overall fiscal position, including contingent obligations not yet in headline deficits or debts.
- Growing interest in medium-term fiscal frameworks and their potential role in recovering from high debt positions; medium-term fiscal targets can anchor market expectations if credibly set and supported by institutions (e.g., medium-term expenditure frameworks).

### Examples of country medium-term commitments (selected developments)
- Germany: In June, the parliament adopted a new constitutional fiscal rule envisaging a gradual move to structural balance from 2011. The rule requires the federal government’s structural deficit not to exceed 0.35 percent of GDP from 2016. States are required to run structurally balanced budgets from 2020.
- Japan: Authorities aim to halve the primary deficit (excluding the social security fund) within five years and to achieve primary balance within ten years. Authorities have committed to stabilizing the debt-to-GDP ratio by the middle of the next decade and placing it on a downward path during the early 2020s.
- United Kingdom: Projects an annual average fiscal consolidation of 1 ⅓ percentage points of GDP from 2010 to 2014, so that debt begins to decline by 2015–16.
- United States: Authorities have published ten-year fiscal forecasts and presented to Congress legislation to reintroduce statutory pay-as-you-go provisions for new programs (requiring offsetting revenue increases or expenditure cuts for any new program introduced).

### Reporting, sovereign balance sheets, and contingent liabilities
- Preserving fiscal solvency requires accurate information on the public sector’s overall position and appropriate management of assets (and associated liabilities) acquired as a result of recent measures in support of the financial system.
- Recent measures (liquidity provision, lending operations, recapitalization and asset purchase operations) have had limited impact on deficits to date but have pronounced effects on sovereign balance sheets.
- Effects include increases in government equity holdings, increased claims by central banks and other public sector entities on financial institutions, and a rise in government contingent liabilities through extension of guarantees.
- These developments heighten the importance of preparing a sovereign balance sheet and underscore challenges arising from increasingly blurred boundaries between the public and private sectors.

*Source: IMF staff report excerpt (chapter/section content provided in the supplied PDF content).*

### 28.      A further element in assessing the state of the public finances relates to the risks

### _spn0921 - 28.      A further element in assessing the state of the public finances relates to the risks

### Fiscal risks and Statements of Fiscal Risks
- The importance of fiscal risks was illustrated by the recent crisis.
- Several countries have begun issuing annual Statements of Fiscal Risks (from macroeconomic shocks, natural disasters, and contingent liabilities), strengthening support for prudent fiscal policy, facilitating risk management, and reducing borrowing costs.
- Going forward, such statements are likely to deepen treatment of fiscal risks from uncertain economic growth and government intervention operations in support of the financial system and may help inform the exit strategy from large public debts.

### Preliminary strategies to ensure fiscal sustainability in G-20 countries (Table 8 — staff views of authorities' intentions)  
- Argentina
  - Nonrenewal of stimulus.
- Australia
  - Medium-term strategy includes target of running surpluses on average over the cycle. Return to surplus projected by 2015–16. 2/
  - Nonrenewal of stimulous. With improvement in conditions, hold real growth in spending to 2 percent per annum until the budget returns to surplus.
- Brazil
  - 3-year budget projection, with primary surplus targets that imply declining debt ratio.
  - Nonrenewal of stimulus and improved tax compliance.
- Canada
  - Debt targets to be recalibrated once economic uncertainties dissipate. Authorities project a return to surplus in 2013/14 and long-term structural balance.
  - Over the medium-term, spending should return to its 2007–08 share of GDP.
  - Nonrenewal of stimulus.
- China
  - Nonrenewal of stimulus.
- France
  - Nonrenewal of stimulus; spending restraint once recovery underway. Consolidation measures initiated prior to crisis (civil service reductions, containment of expenditures, restrictions on tax loopholes).
- Germany
  - Constitutional fiscal rule for federal and state levels—ceiling of structural deficit of 0.35 percent of GDP for FG from 2015 and structural balance for states from 2020.
  - Nonrenewal of stimulus; spending restraint once recovery underway.
- India
  - Nonrenewal of stimulus.
- Indonesia
  - Debt reduction (e.g., to below 30 percent of GDP).
  - Fiscal rule—3 percent deficit and 60 percent debt.
  - Nonrenewal of stimulus.
- Italy
  - Consolidation over the medium-term towards the Medium-term Objective.
  - Budget system and public administration reforms, enhanced tax compliance, and fiscal federalism.
- Japan
  - Halve the primary deficit (excl. the social security fund) within five years and achieve primary balance within ten. Stabilize debt ratio by the mid 2010s and place it on downward path during the early 2020s.
  - Nonrenewal of stimulus; higher consumption taxes and savings on health care and public administration spending.
- Korea
  - Balanced budget (excluding social security fund) over the medium term.
  - Nonrenewal of stimulus and other nonidentified measures.
- Mexico
  - Annual balanced budget rule.
  - Nonrenewal of stimulus; revenue administration reforms.
- Russia
  - Four-year reduction of the overall fiscal and non-oil balances.
  - Nonrenewal of stimulus.
- Saudi Arabia
  - (No measures listed in table excerpt beyond country name.)
- South Africa
  - Gradual reduction of the budget deficit from FY 2010/11 onward.
  - Moderation of expenditure growth trends.
- Turkey
  - Stabilize the debt-to-GDP ratio by 2011.
  - Nonrenewal of stimulus, improved expenditure control, local government reform, introduction of fiscal rule and continuation of tax administration reforms.
- United Kingdom
  - An annual average fiscal consolidation of 1⅓ percent of GDP from 2010 to 2014, projected to result in falling debt by 2015–16. 2/
  - Nonrenewal of stimulus; increases in the marginal income tax of high-income earners, restrictions of tax allowances for high income households, fuel duty increases; efficiency savings; cuts in public sector investment.
- United States
  - Stabilization of debt ratio through 2019. 2/
  - Nonrenewal of most stimulus; proposed reintroduction of statutory PAYGO rules.

Notes from Table 8:
- Source: Survey of Fund G-20 desks.
- 1/ Views of staff of the intentions of G-20 country authorities, based on discussions and announcements and in addition to functioning of automatic stabilizers (recovery of revenues).
- 2/ Note that this is a projection, rather than a target.

### Staff estimates of growth, fiscal balances, and public debt (selected numeric highlights from Appendix tables)
- Appendix Figure 1: Staff estimates of Real GDP Growth and General Government Balances for G-20 Countries, Advanced G-20 Countries, and Emerging G-20 Countries for 2006–14 (charts show series labelled Jul 2009, Apr 2009, Apr 2007, Apr 2008, Oct 2008).
- Appendix Table 1 — Overall Fiscal Balance (in percent of GDP) for selected countries (2007, 2009, 2010, 2014):
  - Argentina: 2007 -2.2, 2009 -3.3, 2010 -1.5, 2014 -0.4
  - Australia: 2007 1.5, 2009 -4.3, 2010 -5.3, 2014 -1.3
  - Brazil: 2007 -2.5, 2009 -3.2, 2010 -1.3, 2014 -1.3
  - Canada: 2007 1.6, 2009 -4.2, 2010 -3.7, 2014 0.5
  - China: 2007 0.9, 2009 -4.3, 2010 -4.3, 2014 -1.0
  - France: 2007 -2.7, 2009 -7.4, 2010 -7.5, 2014 -5.2
  - Germany: 2007 -0.5, 2009 -4.6, 2010 -5.4, 2014 -0.5
  - India: 2007 -5.2, 2009 -9.8, 2010 -8.4, 2014 -4.6
  - Italy: 2007 -1.5, 2009 -5.9, 2010 -6.3, 2014 -4.8
  - Japan: 2007 3/ -2.5, 2009 -10.3, 2010 -10.3, 2014 -7.6
  - United Kingdom: 2007 -2.6, 2009 -11.6, 2010 -13.3, 2014 -6.9
  - United States: 2007 5/ -2.9, 2009 -13.5, 2010 -9.7, 2014 -4.7
  - G-20 aggregate: 2007 -1.1, 2009 -8.1, 2010 -6.9, 2014 -3.1
  - Advanced G-20 Countries: 2007 -1.9, 2009 -10.2, 2010 -8.7, 2014 -4.3
  - Emerging Market G-20 Countries: 2007 0.2, 2009 -4.9, 2010 -4.2, 2014 -1.2
- Appendix Table 1 — General Government Debt (Gross, in percent of GDP) for selected countries (2007, 2009, 2010, 2014):
  - Argentina: 2007 67.9, 2009 50.4, 2010 50.6, 2014 48.4
  - Australia: 2007 8.5, 2009 13.7, 2010 19.1, 2014 25.9
  - Brazil: 2007 67.7, 2009 70.1, 2010 68.5, 2014 62.2
  - Canada: 2007 64.2, 2009 75.6, 2010 76.6, 2014 65.4
  - China: 2007 20.2, 2009 20.9, 2010 23.4, 2014 21.3
  - France: 2007 63.8, 2009 77.4, 2010 83.8, 2014 95.5
  - Germany: 2007 63.6, 2009 79.8, 2010 86.8, 2014 91.4
  - India: 2007 80.5, 2009 83.7, 2010 85.0, 2014 73.4
  - Italy: 2007 103.5, 2009 117.3, 2010 123.2, 2014 132.2
  - Japan: 2007 187.7, 2009 217.4, 2010 226.2, 2014 239.2
  - United Kingdom: 2007 44.1, 2009 68.6, 2010 82.2, 2014 99.7
  - United States: 2007 63.1, 2009 88.9, 2010 99.8, 2014 112.0
  - G-20 aggregate: 2007 62.4, 2009 76.1, 2010 82.1, 2014 86.6
  - Advanced G-20 Countries: 2007 78.8, 2009 100.6, 2010 109.7, 2014 119.7
  - Emerging Market G-20 Countries: 2007 37.5, 2009 38.8, 2010 40.2, 2014 36.4

Notes from Appendix Table 1:
- Source: IMF, World Economic Outlook, July 2009 Update.
- 1/ Data are on calendar-year basis for the general government if available (otherwise central government). Debt is on gross basis for general government, except for Argentina and Korea (central government).
- 2/ Averages are based on 2008 PPP GDP weights.
- 3/ Includes financial sector-related measures of 0.5 percent of GDP in 2009, and 0.2 percent of GDP in 2010.
- 4/ Fiscal projections reflect staff's estimates, based on the authorities' policy intentions as stated in the EU Pre-Accession Program document.
- 5/ Includes financial sector support (5 percent of GDP in 2009 and 1.2 percent of GDP in 2010).

### Fiscal expansion and crisis-related discretionary measures (Appendix Table 2 — change vs 2007, in percent of GDP)
- Selected entries for 2009 and 2010 overall balance, crisis-related discretionary measures, and other factors (2009 / 2010 columns show overall balance, crisis-related discretionary measures 1/, other factors 2/):
  - Argentina: 2009 3/ -1.1 -1.5 0.4 0.7 ; 2010 0.0 0.7 0.2 1.5
  - Australia: 2009 -5.8 -2.9 -2.9 -6.8 ; 2010 -2.0 -4.7 -1.8 -1.6
  - Brazil: 2009 -0.7 -0.6 0.0 1.2 ; 2010 -0.6 1.8 -1.0 -0.2
  - Canada: 2009 -5.7 -1.9 -3.8 -5.2 ; 2010 -1.7 -3.6 -1.0 -0.2
  - China: 2009 -5.2 -3.1 -2.1 -5.2 ; 2010 -2.7 -2.5 -0.7 -0.7
  - France: 2009 -4.7 -0.7 -4.0 -4.8 ; 2010 -0.8 -4.0 -1.1 -1.0
  - Germany: 2009 -4.1 -1.6 -2.5 -4.9 ; 2010 -2.0 -2.9 0.1 0.7
  - Japan: 2009 5/ -7.3 -2.4 -4.9 -7.5 ; 2010 -1.8 -5.7 -0.4 -0.4
  - United Kingdom: 2009 -8.9 -1.6 -7.4 -10.6 ; 2010 0.0 -10.7 -1.7 -2.4
  - United States: 2009 8/ -5.6 -2.0 -3.6 -5.6 ; 2010 -1.8 -3.9 0.6 0.2
  - PPP GDP-weighted average: 2009 -5.5 -2.0 -3.5 -5.5 ; 2010 -1.6 -3.8 0.0 -0.1

Notes from Appendix Table 2:
- Source: Staff estimates based on the July 2009 WEO Update.
- 1/ Figures reflect the budgetary cost of crisis-related discretionary measures in each year compared to 2007 (baseline), based on measures announced through mid-July. They do not include acquisition of assets (including financial sector support) or measures that were planned before the crisis.
- 2/ Includes estimates of the impact of automatic stabilizers, plus noncrisis discretionary spending or revenue measures and the impact of nondiscretionary effects on revenues beyond the normal cycle.
- Additional detailed footnotes clarify country-specific treatments.

### Support for financial and other sectors and upfront financing need (Appendix Table 3 — as of June 2009; in percent of 2008 GDP; PPP-weighted averages)
- G-20 averages (percent of 2008 GDP):
  - Capital Injection (A): 2.2
  - Purchase of Assets and Lending by Treasury (B): 3.5
  - Guarantees (C): 8.8
  - Liquidity Provision and Other Support by Central Bank (D): 9.3
  - Average Upfront Government Financing (E): 3.6
- Advanced Economies averages:
  - Capital Injection: 3.4
  - Purchase of Assets and Lending by Treasury: 5.3
  - Guarantees: 14.0
  - Liquidity Provision and Other Support by Central Bank: 6.9
  - Upfront Government Financing: 5.5
- Emerging Economies averages:
  - Capital Injection: 0.2
  - Purchase of Assets and Lending by Treasury: 0.3
  - Guarantees: 0.1
  - Liquidity Provision and Other Support by Central Bank: 13.6
  - Upfront Government Financing: 0.4
- In billions of US$ (columns A, B, C, D totals): 1,149 ; 1,937 ; 4,646 ; 2,514 ; upfront financing total 1,849 (table presents these totals).

Selected country examples (percent of 2008 GDP, columns A/B/C/D/E where provided):
- Canada: A 0.0, B 10.9, C 13.5, D 1.5, E 10.9
- United States: A 5/ 5.2, B 1.3, C 10.9, D 8.4, E 6.7
- United Kingdom: A 12/ 3.9, B 13.8, C 49.7, D 14.4, E 20.0
- Japan: A 13/ 2.4, B 21.2, C 7.3, D 2.9, E 0.8
- China: A 0.0, B 0.0, C 0.0, D 21.3, E 0.0
- G-20 aggregate row: A 2.2, B 3.5, C 8.8, D 9.3, E 3.6

Notes from Appendix Table 3:
- Columns A, B, C, and E indicate announced or pledged amounts, and not actual uptake. Column D indicates the actual changes in central bank balance sheets from June 2007 to April 2009.
- 5/ Estimated upfront financing need for 2009–10 is US$960 bn (6.7% of GDP), consisting of the allocated amount under TARP (US$510 bn); Treasury purchases of GSE preferred stocks (US$400 bn); and treasury support for Commercial Paper Funding Facility (US$50 bn).
- Other footnotes provide country-specific clarifications on composition and measurement.

### Financial sector support utilized relative to announcement (Appendix Table 4)
- Selected utilization ratios (Amount used, In percent of announcement) for Capital Injection and Purchase of Assets and Lending by Treasury (latest available):
  - Canada: Amount used (Capital Injection) 5.6, In percent of announcement 51.6
  - United States: Amount used (Capital Injection) 2.2, In percent of announcement 41.9 ; Purchase of Assets and Lending by Treasury amount used 0.7, In percent of announcement 53.8
  - France: Amount used (Capital Injection) 0.8, In percent of announcement 57.0 ; Purchase of Assets and Lending by Treasury amount used 0.4, In percent of announcement 26.5
  - Ireland: Amount used (Capital Injection) 3.8, In percent of announcement 63.6
  - Netherlands: Amount used (Capital Injection) 2.3, In percent of announcement 68.8 ; Purchase of Assets and Lending by Treasury amount used 10.2, In percent of announcement 99.4
  - United Kingdom: Amount used (Capital Injection) 3.9, In percent of announcement 100.0 ; Purchase of Assets and Lending by Treasury amount used 3.4, In percent of announcement 24.4
  - Japan: Amount used (Capital Injection) 0.0, In percent of announcement 1.0 ; Purchase of Assets and Lending by Treasury amount used 0.8, In percent of announcement 3.6
  - Korea: Amount used (Capital Injection) 0.8, In percent of announcement 3.0 ; Purchase of Assets and Lending by Treasury amount used 0.3, In percent of announcement 4.8
  - Hungary: Amount used (Capital Injection) 0.1, In percent of announcement 9.3 ; Purchase of Assets and Lending by Treasury amount used 2.1, In percent of announcement 87.0
  - Russia: Amount used (Capital Injection) 0.5, In percent of announcement 40.6 ; Purchase of Assets and Lending by Treasury amount used 0.6, In percent of announcement 40.6
- PPP-weighted average (G-20) utilization:
  - Capital Injection: 1.1 (in percent of 2008 GDP)
  - In percent of announcement: 41.8
  - Purchase of Assets and Lending by Treasury: 0.9
  - In percent of announcement: 18.9

Note:
- Appendix Table 4 source: Staff estimates. Based on the latest information available. PPP weighted averages for the countries listed above.

*Italic: Source content from the provided IMF chapter/section PDF excerpt.*

### Appendix Table 5. Debt and Primary Balance

### Appendix Table 5. Debt and Primary Balance (in percent of GDP)

### Key methodological notes and assumptions
- Definition of required primary balance: "Average primary balance needed to stabilize debt at end-2014 level if the respective debt-to-GDP ratio is less than 60 percent for advanced economies or 40 percent for emerging market economies (no shading); or to bring debt ratio to 60 percent (halve for Japan and reduce to 40 percent for emerging market economies) in 2029 (shaded entries)."
- Simplifying assumptions in the illustrative analysis:
  - Beyond 2014, an interest rate–growth rate differential of 1 percent is assumed, regardless of country-specific circumstances.
  - Projections are "passive" scenarios based on constant policies.
- Footnote references:
  - 1/ IMF, World Economic Outlook, October 2007.
  - 2/ Description of the debt-stabilizing primary-balance benchmark (see definition above).
  - 3/ Pre-crisis WEO projections are not fully comparable to current WEO projections for Greece and Turkey, owing to substantial revisions in their GDP series in late 2007 and early 2008, respectively. For Turkey, fiscal projections reflect staff's estimates given the authorities' policy intentions as stated in the EU Pre-Accession Program document but they do not include measures taken by the government in July 2009 to improve the fiscal position.
  - 4/ "Does not include the impact of debt-reducing measures announced in the recent Economic and Fiscal Update."

### Selected country-level figures (as presented in the table)
- Advanced economies (sample rows as shown):
  - Australia: 7.8 6.0 0.9 0.6 13.7 25.9 -4.3 -0.4 0.3
  - Belgium: 79.2 71.2 3.7 3.5 98.1 111.1 -0.5 -1.3 4.3
  - Canada: 61.0 51.3 1.2 0.5 75.6 65.4 -3.5 -0.4 1.0
  - France: 63.0 60.5 -0.3 0.8 77.4 95.5 -5.3 -2.1 3.1
  - Germany: 61.1 59.4 2.1 2.0 79.8 91.4 -2.3 1.9 2.8
  - Greece: 75.0 70.1 1.5 1.7 108.8 133.7 -1.5 -3.1 5.9
  - Italy: 104.1 102.0 2.5 2.6 117.3 132.2 -0.9 0.5 5.8
  - Japan: 194.2 189.6 -1.8 -0.2 217.4 239.2 -9.0 -5.1 9.8
  - Norway: 43.8 43.8 13.0 9.6 67.2 67.2 4.9 8.4 1.1
  - United Kingdom: 42.9 42.5 -0.5 0.2 68.6 99.7 -10.0 -3.8 3.4
  - United States: 63.4 65.8 -0.8 -0.3 88.8 112.0 -12.3 0.3 4.3
  - P-weighted average (advanced): 74.8 73.6 0.3 0.7 95.8 114.7 -8.0 -0.7 4.2
- Emerging market economies (sample rows as shown):
  - Argentina: 51.0 39.6 2.8 2.4 50.4 48.4 0.5 2.2 1.0
  - Brazil: 67.7 62.7 3.4 3.4 70.1 62.2 1.5 3.3 2.0
  - China: 13.4 11.2 -0.4 -0.6 20.9 21.3 -3.8 -0.4 0.2
  - Hungary: 66.0 65.6 0.3 0.2 77.4 66.9 1.0 3.9 2.3
  - India: 69.8 61.6 0.2 0.5 83.7 73.4 -4.1 0.7 2.8
  - Mexico: 40.9 41.3 0.9 0.2 49.2 44.5 -1.1 -0.4 0.7
  - Russia: 3.9 2.3 1.7 1.5 7.3 7.3 -4.9 2.4 0.1
  - Saudi Arabia: 14.8 11.4 19.2 16.8 14.6 9.4 4.6 14.0 0.1
  - South Africa: 24.0 18.1 2.5 1.9 29.0 29.5 -0.5 0.0 0.3
  - Turkey: 48.7 37.3 6.3 6.3 46.9 58.1 -0.2 1.1 1.7
  - Ukraine: 13.5 12.1 -1.7 -1.6 16.5 24.2 -4.4 -0.1 0.2
  - P-weighted average (emerging): 32.9 29.0 1.4 1.2 38.9 36.8 -2.4 1.0 0.9

### Illustrative policy implications (as implied by table and notes)
- The required average primary balance to stabilize or reduce debt depends on:
  - Current debt-to-GDP levels relative to 60 percent (advanced) or 40 percent (emerging).
  - The assumed interest rate–growth differential beyond 2014 (set to 1 percent in the illustration).
- Countries with high debt-to-GDP ratios (for example, Japan: 194.2 and 189.6 in the presented rows) face larger required adjustments under the illustrative scenarios.
- The analysis is illustrative and subject to the simplifying assumptions noted above; country-specific circumstances and policy changes (including announced debt-reducing measures) can materially alter outcomes.

*Sources: IMF, World Economic Outlook, July 2009 Update and IMF staff calculations. 1/ IMF, World Economic Outlook, October 2007. 2/ See note describing debt-stabilizing primary-balance benchmark. 3/ Pre-crisis WEO projection comparability caveats; 4/ does not include impact of certain debt-reducing measures.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/spn/2009/_spn0921.pdf_