## IMF Fiscal Monitor — Carlo Cottarelli — May 14, 2010

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**Canonical URL:** [IMF Fiscal Monitor — Carlo Cottarelli — May 14, 2010](https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/ft/fm/2010/_fm1001ppt.pdf)

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### Fiscal risks: overview
- Fiscal risks have risen for three reasons:
  - 1. Underlying fiscal trends somewhat weaker
  - 2. Increased focus on fiscal weaknesses
  - 3. More needed to define exit strategies

### Fiscal outlook: advanced economies (selected metrics)
- Overall Balance (In percent of GDP): shown for 2000, 2003, 2006, 2009, 2012, 2015 (charted)
- General Government Gross Debt (In percent of GDP): 72.9 percent, 110.2 percent (charted)
- Primary Balance and Cyclically Adjusted Primary Balance (In percent of GDP): -8.4 percent, -4.7 percent, -1.1 percent, -1.5 percent, 0.7 percent, -6.5 percent, -1.5 percent, 0.1 percent, -4.8 percent
- General Government Gross Debt referenced as 97.8 percent in a chart context

### Fiscal outlook: emerging economies (selected metrics)
- Overall Balance and General Government Gross Debt (In percent of GDP): charts comparing Advanced vs Emerging economies for 2000–2015
- Selected values shown: -3.9 percent, -2.3 percent, 0.0 percent

### Historical: G-7 general government gross debt (1950–2015)
- Country charts provided for: Canada, France, Germany, Italy, Japan, United Kingdom, United States
- G-7 Economies (PPP Weighted) charted across 1950–2015

### Fiscal balances: Advanced and Emerging G-20 economies (2007–2030 projections)
- Metrics charted (In percent of GDP): Cyclically Adjusted Primary Balance, Primary Balance, Overall Balance, General Government Debt Ratio, Budget Balance
- Specific figure highlighted: -4.8 and 3.8 (chart context)

### Episodes of large fiscal adjustments
- Advanced economies: multiple episodes listed with country and years (improvements in cyclically adjusted primary balance, in percent of GDP), including:
  - Italy 1985 to 1993
  - Japan 1978 to 1990
  - United Kingdom 1993 to 2000
  - Cyprus 2003 to 2007
  - Canada 1985 to 1999
  - Belgium 1983 to 1998
  - Israel 1980 to 1983
  - Greece 1989 to 1995
  - Denmark 1982 to 1986
  - Sweden 1980 to 1987; Sweden 1993 to 2000
  - Finland 1993 to 2000
  - Ireland 1978 to 1989
- Emerging economies: multiple episodes listed with country and years (improvements in cyclically adjusted primary balance, in percent of GDP), including:
  - Romania 1996 to 1999; Turkey 1997 to 2001; Romania 1979 to 1984; Paraguay 1981 to 1990; Panama 1982 to 1986; Bulgaria 1993 to 1996; Hungary 1993 to 1996; Morocco 1982 to 1988; Chile 1999 to 2007; Slovak Republic 1992 to 1995; Lebanon 2000 to 2006; Egypt 1984 to 1987; Lebanon 1996 to 1999; Jamaica 1997 to 2000; Turkey 1987 to 1990; Mexico 1981 to 1984; Jordan 1987 to 1990; Tunisia 1983 to 1989; Egypt 1991 to 1994; Jamaica 1983 to 1989; Georgia 1994 to 2004

### Consolidation strategy: three pillars
- 1. Stabilize age-related spending relative to GDP
- 2. Reduce non age-related spending relative to GDP
- 3. Raise additional revenues in an efficient and equitable manner

### Aging-related spending: advanced G-20 economies
- Charted projections of Health Care Expenditure and Pension Expenditure (In percent of GDP) for 2010–2050
- Caption: Fiscal Challenge: Demographic Trends are Unfavorable

### Containing health spending — supply-side measures (measures and rationale)
- Reimburse providers based on case-based methods or global budgets — Discourage unnecessary services
- Implement health information technology — Greater efficiency in service delivery
- Strengthen cost-effectiveness analysis of treatments — Improve allocative efficiency
- Reduce generosity of publicly financed benefits package — Limit to what public funds can cover

### Containing health spending — demand-side measures (measures and rationale)
- Higher copayments — Reduce incentives for excessive use
- Reduce tax expenditures for private health insurance — Reduce incentives for excessive use

### Public sector wages (selected G-7 countries)
- Chart: Public Sector Wages (As share of potential GDP) for 2000–2008
- Series shown for Italy, United Kingdom, United States, Weighted average
- Numeric axis labels include: 9.0, 9.5, 10.0, 10.5, 11.0, 11.5

### Social spending: EU non-age related social spending, 2007
- Bar chart of Total non-age related spending and Means-tested spending (In percent of GDP) for EU countries and EU Average

### Fuel subsidies and fiscal deficits in emerging economies (projected 2010)
- Chart plots Fuel Subsidy (In percent of GDP) against Projected 2010 Fiscal Deficit (In percent of GDP) for selected emerging economies including:
  - Russia, Morocco, South Africa, Pakistan, Nigeria, Argentina, India, Mexico, Malaysia, Brazil, Indonesia, Egypt
- Horizontal axis values for Fuel Subsidy: 0, 2, 4, 6, 8, 10, 12 (percent of GDP)
- Vertical axis includes Fiscal Deficit (In percent of GDP)

### Advanced G-20: budgetary subsidies (In percent of GDP)
- Chart (2008 or nearest year available) with scale: 0.0, 0.4, 0.8, 1.2, 1.6

### Military expenditures in advanced economies, 1990–2010
- Charted (In percent of GDP) with axis 0, 1, 2, 3, 4, 5
- Sources: SIPRI, WEO

### Less distortionary tax measures and potential revenue increases (Advanced G-7, PPP weighted averages)
- Total Increase in Revenue: 2.8 percent of GDP
- Components:
  - Reduce VAT policy gap by half, 1.1
  - Tobacco and alcohol excises, 0.3
  - Fuel excises, 0.4
  - Property taxes, 0.4
  - Full auctioning/taxation of carbon emissions, 0.6
- Additional measures noted:
  - 10 percent VAT in the US (4.5 percent of US GDP) and Japan (2.6 percent of Japan GDP)
  - Revenues from fighting tax evasion (0.7 percent of GDP from VAT)

### Timing of the exit
- Actions and timing shaded across 2010–2011:
  - Deficit Reductions:
    - 2010: EMCs where growth is picking up faster; Any country under pressure from markets
    - 2011: All other countries
  - Entitlement Reforms:
    - 2010 onward: All countries facing aging pressures
  - Strengthening Fiscal Institutions:
    - 2010 onward: All countries

*Source: IMF Fiscal Monitor presentation by Carlo Cottarelli, May 14, 2010*

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_Source: https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/ft/fm/2010/_fm1001ppt.pdf_