Fiscal Policy

Fiscal & TAX Policy

IMF Fiscal Monitor

Advanced Economies

IMF Fiscal Monitor

Types of Taxes

Taxes on Value Added and Imports + Taxes on Income and Wealth(Income Taxes, Corporate Profits Tax, Capital Gains Taxes, Property Taxes)+ Social Security Contributions

Total Taxes

Principles of TaxationImplementability. Cheap to collect, easy to calculate, difficult to avoid.Equitable. VerticalHorizontalEfficient. Neutral effect on market decisions, consistent with growth and prosperity. Some Underlying Principles ofTax PolicybyRichard K. Vedder and Lowell E. Gallaway Link

VAT Taxes thought to be easy to collect and calculate

%KPMG Corporate and Indirect Tax Report

EquityConsiderationsPersonal Equality Poll TaxBenefit Principle Flat TaxAbility to Pay Graduated Tax

Taxes and ProsperityIncentive EffectTaxes on labor income reduce after tax wages and reduce incentive to work; Taxes on financial income reduce after-tax returns and reduce incentive to save; But Income Effect High tax bills may increase need to work or save to hit a target living standard.

No obvious relationship between GDP and tax rates among OECD Countries

PWC Corporate Income Tax Report

Tax IncidenceLost income may not be borne entirely by direct target of tax.Corporate TaxRaise prices, borne by consumersReduce wages, borne by workersReduce dividends, borne by shareholdersReduce investment, born by future consumers workers, or shareholders

Debt

Interest Rates: Cost of borrowing $1 for 1 year $1+i. Net interest rate: i.e.g. if you lend me $100 today, I will pay you $104 in one year, 1+i = 1.04. Interest Rates are reported in % terms, e.g. 4%, or basis points, 400 points.

Primary Deficit Simplified Government Budget Primary Revenue (less Interest Income) - Primary Expenditure (less Interest Paid)

Primary Budget Deficit+ Net Interest Payments on Existing DebtOverall Budget Deficit

Primary Balance% of GDP

Greece

Includes Interest Rates

Can you run a deficit every year?

If then Debt-to-GDP ratio stays stable.If > then deficit is unsustainable

Sustainable DeficitA growing economy allows the government to borrow some money every year and still keep debt in line with overall GDP

Sustainable Primary Deficit

If then stays stable.

http://www.imf.org/external/pubs/ft/fm/2011/02/fmindex.htm

32.9062534.534.5

Consequences of DeficitsAusterityFinancial RepressionSeigniorageDefault

Link

Austerity has a negative effect on business cycles. IMF

Financial RepressionIndebted governments often draw financing from captive financial institutions to keep interest rates low.Domestic banks, public pension fundsIncreased reserve requirementsInternational capital controls. Link

Seigniorage - Central Bank prints money to buy government debt.

Link

Default

Link

32

Sources: Bloomberg L.P.; Consensus Economics; and IMF staff estimates and projections. Note: Euro area countries, subject to data availability. Bond yield spreads, measured vis--vis German Bunds, are an average of August 2011. Average consensus real GDP growth forecasts for 201112. Standard & Poors Ratings

IMF Fiscal Monitor

IMF Fiscal Monitor Crisis spreads to other countries

Background Reading

Sheet1

DebtBond Yield SpreadsS&P Credit RatingAUTAustria72.360.2AAA/Stable/A-1+BELBelgium94.6185.4AA+/Negative/A-1+FINFinland50.241.3AAA/Stable/A-1+FRAFrance86.971.8AAA/Stable/A-1+GRCGreece165.61395.8CC/Negative/CIRLIreland109.3736.1BBB+/Stable/A-2ITAItaly121.1302.9A+/Negative/A-1+NEDNetherlands65.539.7AAA/Stable/A-1+PRTPortugal106.0850.7BBB-/Negative/A-3SLKSlovak Republic44.9180.1A+/Stable/A-1ESPSpain67.4302.1AA/Negative/A-1+

Sheet2

Sheet3

FM Database

International Monetary FundFiscal Affairs Department

Database

September 2011 Fiscal Monitor "Addressing Fiscal Challenges to Reduce Economic Risks"

This database includes the tables, charts, and underlying data from the IMF Fiscal Monitor (September 2011) Addressing Fiscal Challenges to Reduce Economic Risks. When using the data, please refer to the September 2011 Fiscal Monitor.

Disclaimer: Should there be any discrepancies to the print version, the latter represents the official version.

In case of questions, please contact: fiscalmonitor@imf.org

mailto:fiscalmonitor@imf.org?subject=Fiscal%20Monitor%20Fall%202011%20questionTable of Contents

International Monetary FundFiscal Affairs Department

September 2011 Fiscal Monitor "Addressing Fiscal Challenges to Reduce Economic Risks"

Table of Contents

TablesTable 1. Fiscal Balances, 2008-12Table 2. Fiscal Balances in 2011-2012: Medium-Term Plans and IMF Staff ProjectionsTable 3. Selected Advanced Economies: Gross Financing Needs, 201113Table 4. Selected Emerging Economies: Gross Financing Needs, 201112Table 5a. Advanced Economies: General Government Debt and Primary BalanceTable 5b. Emerging Economies: General Government Debt and Primary BalanceTable 6. Assessment of Fiscal Sustainability Risks, 2011

FiguresFigure 1. G-7 Sovereign Bond YieldsFigure 2. Sovereign Bond Yield Spreads over German BundsFigure 3. Sovereign Bond Yield Spreads, General Government Gross Debt and Projected Real GDP GrowthFigure 4. Fiscal Fundamentals in the G-7 plus Spain, 2011Figure 5. Advanced Economies: Average Bond MaturityFigure 6. Holders of Government DebtFigure 7. Emerging Economies: Median 5-Year CDS SpreadsFigure 8. Emerging Economies: Differences in Cyclically Adjusted Primary Balances, 2011, Compared with Precrisis PeriodFigure 9. Components of the Fiscal Indicators Index, 19962011Figure 10. Fiscal Indicators Index by Region, 20012011Figure 11. Emerging Economies: Change in Cyclically Adjusted Primary Balance and in Output Gap, 2011Figure 12. Comparing Fiscal Fundamentals Across Emerging Economies, 2011Figure 13. Selected Advanced Economies: General Government Gross DebtFigure 14. Advanced Economies: Change in Overall Balance and Gross General Government Debt, 201011Figure 15. Advanced Economies: Decomposition of 2011 Debt AccumulationFigure 16. Cyclically Adjusted Primary Balance that Needs to be Maintained in 202030 to Achieve Debt Target by 2030Figure 17. Largest Average Primary Surplus Over a Ten-Year Period

BoxesBox 1. Figure. United States: Government Sponsored Enterprises and Contingent LiabilitiesBox 2. Figure 1. Impact of Negative Growth Shock on Gross General Government Debt, 2016Box 2. Figure 2. Interest Rate ShockBox 3. Figure 1. Fiscal Trends in Oil-Producing EconomiesBox 3. Figure 2. Oil-Producing Economies: Change in Non-oil Primary Balance and Change in Oil Revenues over 200911

Box 4. Table. Determinants of 10-Year Domestic Bond Yields in Emerging EconomiesBox 4. Figure. VIX and Standard Deviation of 10-year Domestic Bond YieldsBox 5. Figure. Signaling Power of Selected IndicatorsBox 6. Figure. G-20 Advanced Economies: Increase in General Government Debt, 200815Box 7. Table. Selected Advanced Economies: Financial Sector SupportBox 7. Figure. Outstanding Government-Guaranteed BondsBox 8. Figure. Overall Fiscal Balance in Low-Income CountriesBox 9. Figure. Adjusting Public Capital Stock for Investment Inefficiency

AppendixAppendix 1. Figure 1. Employment Effects of a Fiscal DevaluationAppendix 1. Table 1. Net Exports Equations with Tax Structure VariablesAppendix 2. Figure 1. Number and Value of Privatization TransactionsAppendix 2. Figure 2. Value of Privatizations Transactions in Developing and Emerging Economies (Excluding EU25 Countries), 19882008Appendix 2. Figure 3. EU25: Composition of Transactions by Industry, 19772009

Appendix 3. Figure 1. Change in General Government DebtAppendix 3. Table . Japan: Illustrative Calculation of General Government Balance Sheet ConceptsAppendix 4. Figure 1. Stock-Flow AdjustmentsAppendix 4. Table 1. Distribution of Stock-Flow Adjustments, 19802010Appendix 4. Figure 2. Decomposition of Large Episodes of Debt ChangesAppendix 4. Figure 3. Advanced Economies: Financial Assets Accumulation and Stock-Flow Adjustments

Appendix 4. Table 2. Advanced Economies: Transactions of Financial Assets, 19802010Appendix 4. Table 3. Unbalanced Fixed Effects Panel Regressions 19802010, with Stock-Flow Adjustments as the Dependent VariableAppendix 4. Figure 4. Fiscal Transparency and Fixed Effects Appendix 4. Figure 5. Fiscal Transparency and the Composition of Debt Increases, 19802010

Methodological and Statistical AnnexStatistical Table 1. General Government BalanceStatistical Table 2. General Government Primary BalanceStatistical Table 3. General Government Cyclically Adjusted Overall BalanceStatistical Table 4. General Government Cyclically Adjusted Primary BalanceStatistical Table 5. General Government ExpenditureStatistical Table 6. General Government RevenueStatistical Table 7. General Government Gross DebtStatistical Table 8. General Government Net DebtStatistical Table 9. Structural Fiscal Indicators

Table 1Table 1. Fiscal Balances, 200812ProjectionsDifference from April 2011 Fiscal Monitor20082009201020112012201020112012

Overall Balance (Percent of GDP)World-1.9-6.7-5.5-4.6-3.80.10.1-0.3

Advanced economies-3.6-8.8-7.5-6.7-5.40.10.4-0.2United States-6.5-12.8-10.3-9.6-7.90.31.1-0.4Euro Area-2.1-6.4-6.1-4.2-3.2-0.10.20.5France-3.3-7.6-7.1-5.9-4.6-0.1-0.10.3Germany0.1-3.1-3.3-1.7-1.1-0.00.70.4Italy-2.7-5.3-4.5-4.0-2.40.00.31.1Spain-4.1-11.1-9.2-6.1-5.20.00.10.5Japan-4.2-10.3-9.2-10.3-9.10.3-0.3-0.7United Kingdom-4.9-10.3-10.2-8.5-7.00.20.1-0.1Canada0.1-4.9-5.6-4.3-3.2-0.10.3-0.4Others1.9-1.00.00.41.1-0.2-0.5-0.6

Emerging economies-0.5-4.8-3.7-2.6-2.30.1-0.0-0.1Asia-2.2-4.7-3.9-3.3-2.70.30.10.0China-0.4-3.1-2.3-1.6-0.80.30.00.1India-7.2-9.7-8.8-8.0-7.60.50.3-0.0ASEAN-5-0.8-3.7-2.9-2.8-2.6-0.1-0.0-0.2Europe0.6-6.2-4.5-2.0-2.2-0.10.30.1Russia4.9-6.3-3.5-1.1-2.10.00.5-0.4Latin America-0.7-3.6-2.9-2.3-2.2-0.1-0.1-0.0Brazil-1.4-3.1-2.9-2.5-2.80.0-0.1-0.2Mexico-1.1-4.7-4.3-3.2-2.8-0.2-1.4-0.4Middle East and North Africa-0.0-2.7-3.0-5.6-4.8-0.9-0.8-0.6

Low-Income economies-1.3-4.2-3.0-3.1-2.9-0.1-0.5-0.6

Oil Producers5.9-3.1-0.80.80.4-0.2-1.3-1.9

G-20 economies-2.6-7.5-6.1-5.4-4.40.20.3-0.2Advanced-4.2-9.5-8.1-7.4-6.00.10.5-0.2Emerging-0.3-4.8-3.5-2.6-2.30.1-0.0-0.1

Cyclically Adjusted Balance (Percent of Potential GDP)Advanced economies-3.3-5.5-5.5-4.8-3.80.20.70.4United States1-4.5-6.7-7.0-6.4-5.00.51.70.7Euro Area-2.9-4.7-4.4-3.2-2.3-0.20.10.6France-3.0-5.3-5.2-4.4-3.40.1-0.00.4Germany-1.1-1.1-2.5-1.5-0.9-0.10.60.6Italy-2.4-3.3-2.9-2.5-1.0-0.10.21.2Spain-5.3-9.7-7.5-4.6-4.1-0.00.10.5Japan-3.7-7.1-7.4-8.1-7.60.10.3-0.2United Kingdom-5.9-8.5-8.0-6.3-4.70.20.30.5Canada-0.5-2.5-4.0-3.0-1.9-0.00.60.3Others0.4-1.5-1.0-0.9-0.2-0.2-0.6-0.5

Emerging economies-2.2-4.4-3.8-3.1-2.60.20.10.1Asia-3.0-5.1-4.2-3.5-2.90.30.1-0.0China-0.9-3.4-2.6-1.8-0.90.2-0.00.2India-9.4-10.6-9.2-8.3-8.00.90.5-0.3ASEAN-5-1.4-2.9-2.5-2.7-2.6-0.5-0.2-0.4Europe-0.2-4.1-3.3-2.0-2.0-0.10.20.2Russia3.7-3.4-1.8-0.3-1.8-0.00.4-0.5Latin America-1.6-2.7-3.1-2.7-2.40.0-0.20.3Brazil-2.1-2.0-3.1-2.6-2.7-0.1-0.1-0.1Mexico-1.7-4.3-4.3-3.4-3.1-0.1-1.3-0.3

G-20 economies-2.9-5.1-5.0-4.3-3.50.20.60.3Advanced-3.4-5.5-5.7-5.2-4.00.20.90.5Emerging-2.2-4.6-3.8-3.0-2.60.20.10.1

Memorandum Items:Overall Balance (Percent of GDP)Advanced economies1-3.3-7.9-7.5-6.6-5.30.50.1-0.2United States1-5.7-10.4-10.2-9.5-7.80.60.0-0.4

Sources: IMF staff estimates and projections.Note: All country averages are weighted by GDP at PPP using 2009 weights. Projections are based on staff assessment of current policies. 1 Excluding financial sector support recorded above the line.

Table 2Table 2. Fiscal Balances in 201112: Medium-Term Plans and IMF Staff Projections(Percent of each projections GDP)20112012Original medium-term plansIMF staff projectionsDifferenceOriginal medium-term plansIMF staff projectionsDifferenceAustralia-2.9-3.9-1.0-1.0-1.9-0.9Canada1, 2-2.7-4.0-1.3-1.5-2.9-1.4France-6.0-5.90.1-4.6-4.6-0.0Germany-3.5-1.71.8-2.8-1.11.7Greece-7.3-8.0-0.7-6.2-6.9-0.7India1-6.8-8.5-1.7-6.1-7.8-1.7Ireland-10.0-10.3-0.3-7.2-8.6-1.4Italy-4.0-4.0-0.1-2.9-2.40.5Japan3-8.0-10.3-2.3-7.6-9.1-1.6Korea40.51.71.21.42.10.7Latvia5-5.3-4.21.1-2.3-2.30.1Lithuania-5.8-5.30.5-3.0-4.5-1.5Mexico6-2.3-2.5-0.2-2.0-2.2-0.2Portugal-4.6-5.9-1.3-3.0-4.5-1.5Russia1-3.7-1.32.4-3.1-2.30.8South Africa1-5.3-4.21.1-4.3-3.80.5Spain-6.0-6.1-0.1-4.6-5.2-0.6Turkey-4.4-0.93.5-3.5-1.02.5United Kingdom1-7.5-8.2-0.7-5.5-6.8-1.3United States1-9.2-9.3-0.1-5.6-7.9-2.3

Sources: Country authorities data; and IMF staff projections. Notes: The table refers to the original medium-term adjustment plans announced during the first nine months of 2010 and described in the working paper "A Status Update on Fiscal Exit Strategies", December 2010. It includes only the countries with adjustment plans. The rationale for the table is to track whether countries are meeting the original targets they had set for themselves in mid-2010, including at the Toronto G-20 meeting. For several countries (see below) the concept of fiscal balance targeted by the authorities in their medium term plans and the corresponding IMF staff projections reported in this table differ from the general government, calendar year concept used in Table 1 and the Statistical Appendix Tables. 1 Refer to fiscal year projections: April 2011March 2012 in Canada, India, South Africa, and the United Kingdom; October 2010September 2011 in the United States; Data for the United Kingdom cover public sector finance, and those for Russia and the United States, cover the federal government.2 Original medium-term plans for Canada are based on the federal government plans plus staff projections for the rest of the general government.3 Authorities projections converted from fiscal to calendar year, and exclude the social security fund.4 Refers to central government only, based on the Government Finance Statistics Manual (1986).5 Excludes bank restructuring costs.6 Corresponds to the traditional balance.

Table 3Table 3. Selected Advanced Economies: Gross Financing Needs, 201113 (Percent of GDP)

201120122013Maturing debtBudget deficitTotal financing needMaturing debt1Budget deficitTotal financing needMaturing debt1Budget deficitTotal financing need

Japan47.510.357.849.59.158.645.87.853.6United States17.69.627.322.47.930.422.96.229.1Greece215.78.023.79.66.916.59.75.214.9Italy18.54.022.621.12.423.517.71.118.9Portugal16.15.922.017.94.522.318.03.021.0Belgium18.03.521.618.93.422.218.53.321.8France14.15.920.016.24.620.816.24.020.2Spain13.46.119.615.45.220.615.04.419.4Ireland38.710.319.05.38.613.98.16.814.9Canada13.24.317.515.43.218.615.41.917.3Netherlands12.53.816.313.22.816.014.22.316.4United Kingdom7.08.515.57.67.014.78.25.113.3Finland9.81.010.88.7-0.38.38.2-0.38.0Germany9.11.710.79.41.110.57.40.88.1Australia2.03.95.93.21.95.13.80.54.3Sweden5.4-0.84.54.9-1.33.62.2-1.70.5

Weighted average 18.77.526.221.56.127.620.94.825.7Sources: Bloomberg L.P.; and IMF staff estimates and projections. Note: Data on maturing debt refer to government securities. 1Assumes that short-term debt outstanding in 2011 and 2012 will be refinanced with new short-term debt that will mature in 2012 and 2013, respectively. Countries that are projected to have budget deficits in 2011 or 2012 are assumed to issue new debt based on the maturity structure of debt outstanding at the end of 2010. 2 Greece's maturing debt assumes 90 percent participation in the debt exchange.3 Irelands maturing debt includes 3.08 billion each year related to the redemption of promissory notes issued in 2010 to support the financial sector.

Table 4Table 4. Selected Emerging Economies: Gross Financing Needs, 201112 (Percent of GDP)20112012Maturing debtBudget deficitTotal financing needMaturing debtBudget deficitTotal financing need

Pakistan20.36.526.721.15.326.5Brazil16.82.519.216.62.819.4Philippines11.52.914.49.92.512.4Poland8.45.513.98.33.812.0Romania9.24.413.69.32.812.1Mexico8.73.212.07.62.810.3Hungary13.7-2.011.611.73.615.3India3.28.011.20.57.68.1Turkey9.50.910.47.41.08.4Lithuania4.95.310.27.74.512.2Thailand6.52.69.14.82.97.7Latvia3.74.58.24.52.36.8Argentina16.02.08.04.41.96.3Malaysia2.95.18.02.94.97.8Ukraine5.12.87.95.02.07.0China16.11.67.74.40.85.2Colombia3.93.06.93.41.54.9South Africa0.94.35.20.93.94.8Bulgaria2.42.54.92.52.24.7Indonesia1.21.83.01.61.33.0Russia1.11.12.20.82.12.9Chile2.4-1.41.01.8-1.60.3Peru1.5-0.60.91.4-0.90.5

Weighted Average6.43.09.35.12.67.7Sources: IMF staff estimates and projections. 1 For details, see "Data and Conventions" in the Methodological and Statistical Appendix.

Table 5a

2010Illustrative Fiscal Adjustment Strategy to Achieve Debt Target in 2030

Gross debtPrimary balanceCAPBCAPB in 202030Required adjustment between 2010 and 2020Required adjustment and age-related spending, 201030Australia20.5-4.7-4.60.55.08.4Austria72.2-2.5-1.61.83.47.7Belgium96.7-0.90.33.12.88.4Canada84.0-4.9-3.40.84.37.8Czech Republic38.5-3.5-2.50.93.44.0Denmark43.7-2.4-1.11.02.04.0Estonia6.60.44.30.4-3.9-3.5Finland48.4-3.2-0.70.41.16.8France82.4-4.9-3.13.16.37.9Germany84.0-1.2-0.42.02.34.6Greece142.8-4.9-5.79.815.519.0Hong Kong SAR33.24.3-1.4-0.90.4Iceland92.4-2.5-3.32.86.111.3Ireland94.9-28.9-6.45.612.013.5Israel77.4-0.7-0.61.01.6Italy119.0-0.31.24.33.14.1Japan220.0-8.1-6.67.013.614.3Korea33.42.83.0-0.6-3.61.3Netherlands63.7-3.9-3.11.34.49.7New Zealand32.0-4.6-3.30.43.78.7Norway55.48.48.78.2-0.44.3Portugal92.9-6.3-5.34.39.613.8Slovak Republic41.8-6.8-5.80.96.68.5Slovenia37.3-4.1-2.81.14.07.9Spain60.1-7.8-6.32.08.310.4Sweden39.7-1.10.60.2-0.5-0.1Switzerland54.51.00.90.2-0.7United Kingdom75.5-7.7-5.83.49.113.3United States94.4-8.4-5.45.410.817.0

Average 98.1-5.7-3.84.07.811.7G-20 advanced104.4-6.2-4.14.38.412.5

Sources: IMF staff estimates and projections.Notes: Averages are weighted by GDP at PPP. The table reports gross debt; Cyclically adjusted primary balance (CAPB) is reported in percent of nominal GDP (in contrast to the conventional definition in percent of potential GDP). General government data are used where available. In the illustrative fiscal adjustment strategy, the CAPB is assumed to improve in line with Fiscal Monitor projections in 201112 and gradually from 2013 until 2020; thereafter, it is maintained constant until 2030. The fifth column shows the CAPB adjustment needed between 2010 and 2020 to bring down the debt ratio to 60 percent in 2030 (shaded entries, "higher debt"), or to stabilize debt at the end-2012 level by 2030 if the respective debt-to-GDP ratio is less than 60 percent (no shading, "lower debt"). The analysis is illustrative and makes some simplifying assumptions: in particular, up to 2015, an interest rategrowth differential of 0 percentage points is assumed, broadly in line with WEO assumptions, and 1percentage point afterward regardless of country-specific circumstances. The last column adds the projected increase in health care and pension spending between 2010 and 2030 (see Statistical Table 9), which will require offsetting measures. Illustrative scenarios for Australia, Canada, Japan, and New Zealand are based on their net debt ratios (see Statistical Table 8 for net debt data); for Japan, a net debt target of 80percent of GDP is assumed, which corresponds to a target of 200percent of GDP for gross debt. For Norway, maintenance of primary surpluses at the projected 2012 level is assumed (primary balance includes oil revenue whereas elsewhere in this document the non-oil balance is shown). For the United States, the CAPB excludes financial sector support recorded above the line. For countries not reporting CAPB or output gap, a Hodrick-Prescott filter is used to estimate potential output, and the CAPB is estimated assuming growth elasticities of 1 and 0 for revenues and expenditure, respectively. For details, see "Data and Conventions" in the Methodological and Statistical Appendix.

Table 5a. Advanced Economies: General Government Debt and Primary Balance(Percent of GDP)

Table 5b

2010Illustrative Fiscal Adjustment Strategy to Achieve Debt Target in 2030

Gross debtPrimary balanceCAPBCAPB in 202030Required adjustment between 2010 and 2020Required adjustment and age-related Spending, 201030Argentina49.11.71.90.3-1.60.3Brazil66.82.42.21.4-0.82.0Bulgaria17.4-3.7-0.70.31.01.9Chile9.2-0.3-2.0-0.31.8China33.8-1.8-2.10.32.43.4Colombia36.0-1.4-1.00.31.3Hungary80.2-0.51.02.81.93.2India67.3-4.3-4.63.07.68.4Indonesia27.40.20.20.20.00.8Jordan66.8-3.3-3.43.46.7Kazakhstan10.71.80.4-0.3-0.7Kenya50.4-3.7-3.21.64.8Latvia39.9-6.4-2.6-0.02.54.4Lithuania38.7-5.5-3.61.34.98.1Malaysia54.2-3.6-3.72.56.28.6Mexico42.9-1.9-2.00.72.75.9Morocco51.1-1.21.72.00.3Nigeria17.3-7.4-7.3-0.86.5Pakistan56.8-1.6-1.62.03.64.2Peru24.50.7-0.0-0.2-0.2Philippines44.7-0.1-0.30.50.81.7Poland55.0-5.2-5.01.96.97.3Romania31.7-5.1-3.90.54.37.6Russia11.7-3.2-1.60.41.97.6South Africa34.8-2.5-2.00.62.64.3Thailand44.1-1.9-1.51.02.5Turkey42.20.8-0.0-0.00.04.5Ukraine40.1-4.1-1.60.31.99.1

Average 41.6-1.9-1.90.92.84.7G-20 emerging41.6-1.7-1.80.92.64.6

Table 5b. Emerging Economies: General Government Debt and Primary Balance(Percent of GDP)Sources: IMF staff estimates and projections.Notes: Averages are weighted by GDP at PPP. Cyclically adjusted primary balance (CAPB) is reported in percent of nominal GDP. In the illustrative fiscal adjustment strategy, the CAPB is assumed to improve in line with Fiscal Monitor projections in 201112 and gradually from 2013 until 2020; thereafter, the CAPB is maintained constant until 2030. The fifth column shows the CAPB adjustment needed between 2010 and 2020 to bring down the debt ratio to 40 percent in 2030 (shaded entries, "higher debt"), or to stabilize debt at the end-2012 level by 2030 if the respective debt-to-GDP ratio is less than 40 percent (no shading, "lower debt"). The analysis is illustrative and makes some simplifying assumptions: in particular, up to 2015, an interest rategrowth differential of 0percentage points is assumed, broadly in line with WEO assumptions, and 1 percentage point afterward regardless of country-specific circumstances. For large commodity-producing countries, even larger fiscal balances might be called for in the medium term than shown in the illustrative scenario, given the high volatility of revenues and the exhaustibility of natural resources. The last column adds the projected increase in health care and pension spending between 2010 and 2030 (see Statistical Table9), which will require offsetting measures. For countries not reporting CAPB or output gap, a Hodrick-Prescott filter is used to estimate potential output, and the CAPB is estimated assuming growth elasticities of 1 and 0 for revenues and expenditure, respectively. For details, see "Data and Conventions" in the Methodological and Statistical Appendix.

Table 6Table 6. Assessment of Fiscal Sustainability Risks, 2011AdvancedEmergingShort- and medium-term fiscal indicators-0.090.06Long-term fiscal challenges-0.02-0.03Liability structure0.04-0.08Macroeconomic uncertainty0.290.11Policy implementation0.280.11Financial sector risks0.991.00Source: IMF staff estimates.Note: Directional arrows: and , indicate on average unchanged, higher risks respectively; indicates moderate increases in levels of risk.

Figure 1

`

Figure 1. G-7 Sovereign Bond Yields(Percent)

Source: Datastream.Note: Secondary markets 10-year sovereign bond yields.

Figure 2

Figure 2. Sovereign Bond Yield Spreads over German Bunds(Basis points)Sources: Bloomberg L.P.; Datastream.Note: 10-year sovereign bond yields.

Figure 3DebtBond Yield SpreadsAUTAustria72.360.2BELBelgium94.6185.4FINFinland50.241.3FRAFrance86.971.8GRCGreece165.61395.8IRLIreland109.3736.1ITAItaly121.1302.9NEDNetherlands65.539.7PRTPortugal106.0850.7SLKSlovak Republic44.9180.1ESPSpain67.4302.1

GrowthBond Yield SpreadsAUTAustria2.360.2BELBelgium2.1185.4FINFinland3.041.3FRAFrance1.871.8GRCGreece-2.31395.8IRLIreland0.8736.1ITAItaly0.8302.9NEDNetherlands1.839.7PRTPortugal-2.0850.7SLKSlovak Republic3.6180.1ESPSpain0.9302.1

Figure 3. Sovereign Bond Yield Spreads, General Government Gross Debt, and Projected Real GDP Growth

Sources: Bloomberg L.P.; Consensus Economics; and IMF staff estimates and projections. Note: Euro area countries, subject to data availability. Bond yield spreads, measured vis--vis German Bunds, are an average of August 2011. Average consensus real GDP growth forecasts for 201112.

Figure 4Data for Bars2011DebtGFNST DebtCAPDPensionsHealthr-gCanada34.935.078.941.2124.145.924.9France86.940.091.633.58.034.2-16.0Germany82.621.5109.1-9.4104.021.226.8Italy121.145.175.3-32.724.014.3107.9Japan130.6115.7110.9114.3-18.222.3-18.7Spain67.439.187.149.640.036.249.4United Kingdom80.831.048.959.872.076.3-43.3United States100.054.593.481.188.0117.5-38.9Data for LabelsDebtGFNST DebtCAPDPensionsHealthr-gCanada34.917.519.72.41.62.00.5France86.920.022.92.00.11.5-0.3Germany82.610.727.3-0.61.30.90.5Italy121.122.618.8-1.90.30.62.2Japan130.657.827.76.7-0.21.0-0.4Spain67.419.621.82.90.51.61.0United Kingdom80.815.512.23.50.93.3-0.9United States100.027.323.44.81.15.1-0.8

Figure 4. Fiscal Fundamentals in the G-7 economies plus Spain, 2011

Sources: BIS; Bloomberg L.P.; and IMF staff estimates and projections.Notes: The indicators reported are the seven with the best signaling power from Baldacci, McHugh, and Petrova (2011) (see also Box 5). Debt refers to gross general government debt in percent of GDP; GFN is gross financing needs in percent of GDP; ST Debt is short-term debt securities at remaining maturity as a percentage of total debt securities, as of end-2010 ,as reported by BIS (except for Canada and Japan; see note 1); CAPD is cyclically adjusted primary deficit in percent of potential GDP; Pensions is the change in long-term public pensions spending from 2010 to 2030 in percent of GDP; Health is the change in long-term public health spending from 2010 to 2030 in percent of GDP; and r-g is the average interest rategrowth differential from 2012 to 2016 in percent. As each indicator is expressed in different units, the size-of-the-bars differential is standardized.1 Debt refers to net debt.

Figure 5

Average years to maturityApr-09Sep-11DifferenceCountries with longer term to maturity than in April 2009Italy6.87.20.4France6.77.00.3Belgium5.96.30.4Ireland5.86.20.4Netherlands5.46.10.7Canada5.65.80.2Japan5.35.80.5Finland4.65.20.6United States4.15.11.0Australia4.55.10.6Countries with shorter term to maturity than in April 2009Germany6.35.6-0.7Sweden7.65.8-1.8Portugal6.76.0-0.7Spain6.86.2-0.6Greece8.46.9-1.5United Kingdom14.013.9-0.1Weighted Average5.76.2

Average Years to Maturity ChangeGBRUnited Kingdom-0.1SWESweden-1.8FINFinland0.6NLDNetherlands0.7CANCanada0.2USAUnited States1.0DEUGermany-0.7AUSAustralia0.6FRAFrance0.2JPNJapan0.5BELBelgium0.4ITAItaly0.5ESPSpain-0.6PRTPortugal-0.7IRLIreland0.4GRCGreece-1.5

10 Year Bond YieldsChangeGBRUnited Kingdom-0.1SWESweden-0.2FINFinland-0.5NLDNetherlands-0.4CANCanada0.2USAUnited States0.3DEUGermany-0.2AUSAustralia0.5FRAFrance-0.3JPNJapan-0.2BELBelgium0.4ITAItaly1.2ESPSpain2.2PRTPortugal6.8IRLIreland6.5GRCGreece9.3

Change in Bond Yields and Average Term to Maturity, September 2011 vs. April 2009

Average Term to Maturity, September 2011(Years)

Sources: Bloomberg; Datastream; and IMF staff estimates.Note: Average term to maturity is based on government securities. Figure 5. Advanced Economies Average Bond Maturity

Figure 6

Data for Chart:

JapanUKUSGreeceIrelandPortugalIntragovernmental holdings 2,810.55Intragovernmental holdings 20.15Intragovernmental holdings 2,435.03Intragovernmental holdings 21.06Banks 324.64Banks 310.77Banks 32.29Domestic Banks 318.3213.8322.41Insurance companies and pension funds 723.98Insurance companies and pension funds28.97Insurance, pension, and mutual funds11.98Other domestic financial institutions11.802.135.76Other7.34Other10.04Other7.61Other domestic investors2.320.297.78Bank of Japan8.30Bank of England19.66U.S. Federal Reserve11.87National Central Bank2.780.77Foreign official holdings (estimated)2.24Foreign official holdings6.17Foreign official holdings22.14Non-resident (incl. ECB)64.7882.6963.28Other non-residents2.79Other non-residents24.25Other non-residents9.09Japan Post Bank20.17

Sources: Country authorities; Japan Post Bank; Currency Composition of Official Foreign Exchange Reserves (COFER) database; and IMF staff estimates.Note: Data as of 2011:Q2 for the Greece, Ireland, and the United States, 2011:Q1 for Japan and the United Kingdom; 2010:Q4 for Portugal.1 Includes marketable and nonmarketable debt.2 Holdings by general government institutions.3 For the United States, refers to depository institutions; for Greece, Portugal, and the United Kingdom, refers to monetary financial institutions excluding the central bank; for Ireland ,refers to monetary financial institutions and national central bank; and for Japan, includes depository institutions, securities investment trusts and securities companies and excludes Japan Post Bank.4 Includes Government Account Series securities held by government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. 5 Includes bonds, T-bills and other short-term notes.6 Includes Fiscal Investment and Loan Program (FILP) bonds and does not include T-Bills.7 Includes Japan Post Insurance and excludes public pensions.8 Includes public pensions.

Figure 6. Holders of Government Debt(Percent of total outstanding)

Figure 7

Sources: Markit; and IMF staff estimates.Note: The shaded area represents the middle 80 percent of the distribution of CDS spreads in emerging economies; in other words, the shaded area excludes countries with the 10 percent highest and 10 percent lowest CDS spreads. Figure 7. Emerging Economies: Median 5-Year CDS Spreads(Basis points)

Figure 8

CountryExcluding IncludingSaudi Arabia-35.6-18.4Russia-7.0-7.1Thailand-3.8South Africa-3.7Argentina-3.6-2.7India-3.3Turkey-2.9Nigeria-2.7-10.2Colombia-2.5-2.7Indonesia-2.3-2.5Mexico-2.1-2.3Bulgaria-1.8Peru-1.5-1.6Malaysia-1.5Poland-1.4Chile-1.2-2.2China-0.8Brazil-0.4Hungary1.1Ukraine3.5

Figure 8. Emerging Economies: Differences in Cyclically Adjusted Primary Balances, 2011, Compared with the Precrisis Period(Percent of potential GDP)Sources: IMF staff estimates and projections.Note: Precrisis deficits refer to 200407, subject to data availability. For Nigeria and Saudi Arabia, data reflect change in primary balance as percentage of non-oil GDP. For countries with significant commodity revenues (marked with red diamonds), changes in cyclically adjusted primary balances are shown both including and excluding these revenues.

Figure 9Advanced Economies1996199719981999200020012002200320042005200620072008200920102011Gross public debt0.00.00.00.00.00.00.00.00.00.00.00.00.00.10.10.1Cyclically-adjusted primary balance0.00.00.00.00.00.00.00.00.00.00.00.00.00.10.10.1Gross financing needs0.10.10.10.00.00.00.00.00.00.00.00.00.10.20.20.2Short-term debt0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0Long-term fiscal trend 1/0.00.10.10.10.10.10.10.10.10.10.10.10.10.10.10.1Other 2/0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0Average fiscal stress index0.10.20.10.20.20.20.20.20.20.20.20.20.30.40.40.4

Emerging Economies1996199719981999200020012002200320042005200620072008200920102011Gross public debt0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0Cyclically-adjusted primary balance0.00.10.10.10.10.10.10.10.00.10.00.00.00.10.10.1Gross financing needs0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0Short-term debt0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0Long-term fiscal trend 1/0.00.00.00.00.10.10.10.10.10.10.10.10.10.10.10.1Other 2/0.10.10.10.10.10.10.10.10.10.10.10.10.10.10.10.1Average fiscal stress index0.20.30.30.20.20.20.20.20.20.30.20.20.20.30.30.2

Figure 9. Components of the Fiscal Indicators Index, 19962011(Scale,01)

Sources: Baldacci and others (2011); and IMF staff calculations.Note: 2009 PPP-GDP weights used to calculate weighted averages. Larger value of the FII suggests higher fiscal risk.1 Includes fertility rate, dependency ratio, and pension and health spending.2 Includes interest rategrowth differential, average debt maturity, and debt held by nonresidents (for advanced economies), and foreign-currency-denominated debt and short-term external debt to reserves (for emerging economies).

Figure 10

Advanced Economies20012002200320042005200620072008200920102011North America0.00.00.20.10.10.10.10.30.50.50.5Asia and Pacific0.00.00.40.30.30.30.30.30.40.40.4Europe0.00.10.10.10.10.10.20.20.30.30.3

Emerging Economies20012002200320042005200620072008200920102011Latin America0.20.20.10.20.20.20.20.20.30.20.2Emerging Asia0.20.10.10.10.20.10.10.10.10.10.1Emerging Europe0.30.20.30.30.30.30.30.40.40.40.4

Figure 10. Fiscal Indicators Index by Region, 200111(Scale, 01)

Sources: Baldacci and others (2011); and IMF staff calculations.Note: 2009 PPP-GDP weights used to calculate weighted averages. Larger value of the FII suggests higher fiscal risk.

Figure 11

Increase in Output gapIncrease in CAPBOutput above potentialBGRBulgaria-0.11.50.0HUNHungary0.7-4.90.0LTULithuania3.10.70.0MEXMexico1.41.10.0RUSRussia2.11.70.0ZAFSouth Africa0.41.00.0UKRUkraine2.71.80.0IDNIndonesia0.2-0.50.0PERPeru0.01.01.0THAThailand2.50.11.0ARGArgentina2.0-1.31.0BRABrazil-0.30.81.0CHNChina-0.51.31.0INDIndia-0.10.61.0MYSMalaysia1.7-0.11.0POLPoland0.82.11.0TURTurkey1.80.71.0CHLChile1.80.41.0

Figure 11. Emerging Economies: Change in Cyclically Adjusted Primary Balance and in Output Gap, 2011(Percent of Potential GDP)

Sources: IMF staff projections.Note: The output gap is defined as the difference between actual and potential GDP. If the output gap is deteriorating, there is greater spare capacity in the economy. Circles denote countries with output level above potential in 2011.

Figure 12

Data for Bars2011DebtGFNST DebtCAPDPensionsHealthr-gArgentina43.323.928.7-6.66.061.2-57.8Brazil65.057.752.6-36.519.562.13.8China26.923.268.810.92.733.6-49.7India64.933.56.747.66.614.9-30.9Indonesia25.28.925.14.15.618.5-31.1Mexico42.936.043.911.031.544.7-0.9Russia11.76.616.1-2.968.345.2-14.7Saudi Arabia7.10.00.0-116.720.841.6-1.1South Africa36.915.529.512.19.445.0-2.1Turkey40.331.34.3-7.547.552.03.9

Data for LabelsDebtGFNST DebtCAPDPensionsHealthr-gArgentina43.38.019.2-0.50.41.5-9.6Brazil65.019.235.1-3.01.31.60.6China26.97.745.90.90.20.8-8.3India64.911.24.44.00.40.4-5.1Indonesia25.23.016.70.30.40.5-5.2Mexico42.912.029.20.92.11.1-0.1Russia11.72.210.8-0.24.61.1-2.5Saudi Arabia7.1-9.71.41.0-0.2South Africa36.95.219.71.00.61.1-0.4Turkey40.310.42.9-0.63.21.30.6

Figure 12. Comparing Fiscal Fundamentals across Emerging Economies, 2011

Sources: BIS; Bloomberg L.P.; and IMF staff estimates and projections.Note: Debt refers to gross general government debt in percent of GDP; GFN is gross financing needs in percent of GDP; ST Debt is short-term debt securities at remaining maturity as a percentage of total debt securities, as of end-2010; CAPD is cyclically adjusted primary deficit in percent of potential GDP; Pensions is the change in long-term public pensions spending from 2010 to 2030 in percent of GDP; Health is the change in long-term public health spending from 2010 to 2030 in percent of GDP; and r-g is the average interest rategrowth differential from 2012 to 2016 in percent. As each indicator is expressed in different units, the size -of-the-bars differential is standardized.1 For details, see "Data and Conventions" in the Methodological and Statistical Appendix.2 GFN and ST Debt data are not available. A Hodrick-Prescott filter is used to estimate potential output, and the CAPB is estimated assuming growth elasticities of 1 and 0 for revenues and expenditure, respectively.

Figure 13

20072011Japan187.7233.1Greece105.4165.6Italy103.6121.1Ireland24.9109.3Portugal68.3106.0U.S.62.3100.0France64.286.9Canada66.584.1Germany65.082.6U.K.43.980.8Spain36.167.4Korea30.732.0Australia9.622.8PPP GDP weighted average76.2108.3

Figure 13. Selected Advanced Economies: General Government Gross Debt(Percent of GDP)Sources: IMF staff estimates and projections.Note: Weighted averages based on 2009 purchasing power parity GDP.

Figure 14

Increase in DeficitIncrease in DebtAUSAustralia-1.12.3AUTAustria-1.20.2BELBelgium-0.5-2.1CANCanada-1.30.2CZECzech Republic-0.82.6DNKDenmark0.10.7FINFinland-1.81.8FRAFrance-1.24.5DEUGermany-1.6-1.3GRCGreece-2.422.8ISLIceland-1.38.8IRLIreland-3.514.3-21.714.3