{
  "title": "Resolutions for the Fiscal New Year—Staying on Track Is No Easy Task",
  "publication": "IMF Blog, February 4, 2013",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/02/04/resolutions-for-the-fiscal-new-year-staying-on-track-is-no-easy-task",
  "canonical": "https://www.imf.org/en/blogs/articles/2013/02/04/resolutions-for-the-fiscal-new-year-staying-on-track-is-no-easy-task",
  "overlayPath": "/en/blogs/articles/2013/02/04/resolutions-for-the-fiscal-new-year-staying-on-track-is-no-easy-task/index.md",
  "summary": "One month into 2013, many private New Year resolutions have already been forgotten; fiscal resolutions in advanced economies have largely been kept.",
  "sections": [
    {
      "heading": "Context and overview",
      "content": "- One month into 2013, many private New Year resolutions have already been forgotten; fiscal resolutions in advanced economies have largely been kept.\n- The article compares typical personal resolutions (e.g., achieving a healthier weight) with countries’ commitments to fiscal deficit reduction, arguing that keeping fiscal commitments is difficult but essential."
    },
    {
      "heading": "Key findings and statistics",
      "content": "- The average headline deficit in advanced economies fell by about ¾ percent of GDP in 2012.\n- Cumulative deficit decline since budget shortfalls peaked in 2009 is 3 percent of GDP.\n- In some advanced economies:\n  - Debt ratios have begun to decline.\n  - In several others, debt ratios have stabilized.\n- In another group of countries (including some very large economies):\n  - Debt ratios are continuing to rise rapidly or have stabilized at very elevated levels.\n  - These countries will need significant deficit reduction in coming years to return debt ratios to more sustainable levels.\n- The United States and Japan are specifically identified as needing credible medium-term plans to restore public finances.\n- The United States must resolve to increase the debt ceiling expeditiously (and not just for a few months)."
    },
    {
      "heading": "Analysis of fiscal consolidation and growth interactions",
      "content": "- The impact of deficit reductions on growth depends on the design and timing of fiscal adjustment policies.\n- Under normal circumstances, a $1 cut in government spending typically reduces output by less than $1 because resources shift from public to private production.\n- With a weak private sector:\n  - Cuts in government spending are not partially offset by higher household and firm spending.\n- With interest rates in many advanced economies close to zero:\n  - There is limited scope for central banks to offset fiscal tightening by loosening monetary policy.\n- Therefore, countries that can afford gradual adjustment should avoid excessive front-loading of fiscal consolidation now.\n- As private sector balance sheets mend and banks recover lending capacity:\n  - Private demand should pick up and partially replace lower government demand.\n  - This replacement requires monetary conditions to remain relaxed for a long time—consistent with recent Fed guidance and advice for other central banks."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Countries that need to tighten policy should:\n  - Resolve to reduce fiscal deficits in a gradual and steady manner.\n  - Avoid excessive front-loading of consolidation.\n  - Commit to credible medium-term plans rather than postponing adjustment entirely.\n- Specific national recommendations:\n  - The United States: increase the debt ceiling expeditiously (and not just for a few months).\n  - Japan: adopt and begin enacting credible medium-term plans to restore public finances, especially given recent short-term fiscal stimulus.\n- For countries with Fund-supported adjustment programs:\n  - Allow for revised fiscal targets in response to slow growth to achieve a more gradual pace of consolidation (examples given: Ireland and Portugal)."
    },
    {
      "heading": "Concluding assessment",
      "content": "- Gradual but steady progress is the safest and surest approach to restoring fiscal health.\n- Maintaining credible, medium-term commitments is essential for returning public debt to safer levels and for ensuring that consolidation does not unduly harm growth.\n\nCarlo Cottarelli, Philip Gerson — February 4, 2013\n\n---\n\n\n References\n\n- عربي\n\nSource: https://www.imf.org/en/blogs/articles/2013/02/04/resolutions-for-the-fiscal-new-year-staying-on-track-is-no-easy-task"
    }
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    "Authors: Carlo Cottarelli, Philip Gerson",
    "Published: February 4, 2013",
    "One month into 2013, many private New Year resolutions have already been forgotten; fiscal resolutions in advanced economies have largely been kept.",
    "The article compares typical personal resolutions (e.g., achieving a healthier weight) with countries’ commitments to fiscal deficit reduction, arguing that keeping fiscal commitments is difficult but essential.",
    "The average headline deficit in advanced economies fell by about ¾ percent of GDP in 2012.",
    "Cumulative deficit decline since budget shortfalls peaked in 2009 is 3 percent of GDP.",
    "In some advanced economies:",
    "In another group of countries (including some very large economies):",
    "The United States and Japan are specifically identified as needing credible medium-term plans to restore public finances.",
    "The United States must resolve to increase the debt ceiling expeditiously (and not just for a few months).",
    "The impact of deficit reductions on growth depends on the design and timing of fiscal adjustment policies.",
    "Under normal circumstances, a $1 cut in government spending typically reduces output by less than $1 because resources shift from public to private production.",
    "With a weak private sector:",
    "With interest rates in many advanced economies close to zero:",
    "Therefore, countries that can afford gradual adjustment should avoid excessive front-loading of fiscal consolidation now.",
    "As private sector balance sheets mend and banks recover lending capacity:",
    "Countries that need to tighten policy should:",
    "Specific national recommendations:",
    "For countries with Fund-supported adjustment programs:",
    "Gradual but steady progress is the safest and surest approach to restoring fiscal health.",
    "Maintaining credible, medium-term commitments is essential for returning public debt to safer levels and for ensuring that consolidation does not unduly harm growth.",
    "[عربي](http://blog-montada.imf.org/?p=2060)"
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