Overview of Presentation

Transcription

1

2 Overview of Presentation Fiscal Outlook and Challenges How to Address Fiscal Challenges? 2

3 Fiscal Outlook and Challenges 3

4 While the fiscal drag is waning in AE, EMEs would need to start rebuilding buffers after their accommodative fiscal policy to mitigate the impact of the global slowdown 2 Average Annual Cyclically Adjusted Primary Balance Change (Percent of potential GDP) ADV USA Euro area EME CHN LATAM Source: IMF, Fiscal Monitor, October 2013.

5 2013 Cyclically Adjusted Primary Deficit There is a wide variety across and within regions among EMEs in terms of fiscal vulnerabilities 7 (Percent of GDP) Egypt 6 5 High debt High deficit 4 3 Malaysia India Thailand Chile Bulgaria Russia China South Africa Argentina Ukraine Indonesia Mexico Latvia Lithuania Poland Romania Philippines Jordan -1-2 Low debt Low deficit Peru Colombia Turkey Brazil Hungary Source: IMF, Fiscal Monitor, October Public Debt to GDP ratio

6 Emerging external risks that could expose fiscal vulnerabilities in EMEs, particularly in LATAM include Lower demand/price for commodities US monetary policy (tapering) Growth slow down in China

7 Some EMEs are indeed particularly vulnerable to interest rate and growth shocks Peru PER China CHN Chile CHL Russia RUS Bulgaria BGR Indonesia IDN Colombia COL Latvia LVA Turkey TUR Philippines PHL Romania ROM Argentina ARG Lithuania LTU Mexico MEX Kenya KEN South Africa ZAF Poland POL Thailand THA Malaysia MYS Ukraine UKR Brazil BRA India IND Hungary HUN Jordan JOR Impact of a 4 percentage-point Combined Low Growth and Interest Rate Shock on Debt in 2018, Unchanged Policy (Percent of GDP) Change from baseline: combined low growth and high interest rate 80 Baseline (Latin America) Baseline (non Latin America) Baseline + shock Source: IMF, Fiscal Monitor, October 2013.

8 In addition to short-term vulnerabilities, EMEs also face additional long-term spending pressures, including in health and pension. LVA POL HUN BGR LTU ROM UKR RUS TUR CHL PAK IND KEN NGA KAZ IDN MAR PER PHL COL ZAF THA MYS MEX SAU ARG BRA JOR EGY CHN 8 EMEs: Projected Change in Health and Pension Spending, (In percent of GDP) Pension 6 4 Health Total Simple Average Source: IMF, Fiscal Monitor, October 2013.

9 Relatively high income inequality is also adding to pressure for reforms, particularly in the most unequal regions. Disposable Income Inequality, GINI Coefficient 2010 Latin America and Caribbean Sub-Saharan Africa Asia and Pacific Middle East and North Africa Emerging Europe Advanced 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 Source: IMF (2014)

10 How to Address Fiscal Challenges? 10

11 LUX ESP IRL DEU AUT NLD FIN DNK BEL GBR GRC FRA ITA SWE PRT CHL PER COL GTM MEX HUN URY LVA DOM Focus on revenue mobilization where there is scope to tax better in view of the spending pressures 4,5 Revenue Gain from Closing Half of VAT Compliance Gap and Policy Gap (Percent of GDP) Baseline (Asia) (non Asia) 4,0 3,5 Compliance Gap Policy Gap 3,0 2,5 2,0 1,5 1,0 0,5 0,0 ADV EME

12 and tax more fairly in view of the relatively high income inequality 2,5 Ratio of Direct to Indirect Tax Revenue 2,0 1,5 Advanced economies 1,0 Emerging market economies 0,5 Latin America 0,

13 Malaysia Kazakhstan South Africa Egypt Indonesia Philippines Kenya Thailand Russia Morocco India Peru Pakistan Latvia Chile Ukraine Hungary Lithuania Romania Poland Colombia Mexico Turkey Brazil China Jordan Bulgaria Argentina Emerging Market Economies: Ratio of Direct to Indirect Tax Revenue, Progressive 2,5 2 1,5 1 0,5 0 Regressive

14 While there is a considerable heterogeneity across EMEs, capital spending has usually been cut during fiscal consolidation but not increased during fiscal expansion LTU ROU POL RUS JOR ZAF EGY HUN IND PHL BGR THA BRA IDN UKR TUR ARG 15 Selected Emerging Market Economies: Change in Expenditure Items, (Percent of potential GDP) Other Social benefits Capital expenditure Compensation of employees Primary expenditure -15

15 Expenditure also need to be prioritized to enhance its growth impact, reduce inefficiencies, and improve equity Address the infrastructure gap to support growth Consolidate social assistance programs and improve targeting Improve access to education and health services

16 Thank you! 16