The US and Japan are adopting new stimulus measures and delaying consolidation, relative to the pace envisaged in the November 2010 Fiscal Monitor, the IMF said in its January update released here Thursday.
Consolidation in emerging G20 economies is expected to continue, but cross-country differences within this group are becoming more pronounced as well, it said. Fiscal deficits in some key emerging economies are expected to be higher than in the November Monitor, due to the carryover of spending committed in the second half of 2010, in the case of Brazil and, to a lesser extent China, or the non-recurrence of certain receipts from last year in Brazil and India.
The underlying fiscal outlook has also weakened in some emerging markets. Among them are several that need to build larger fiscal buffers, particularly in the face of surging capital inflows, overheating, and possible contagion from advanced countries, the IMF said. By contrast, advanced economies in Europe are projected to continue tightening policies amid heightened market scrutiny in several countries.
While advanced economies maintained expansionary fiscal policies on average in 2010, outturns were generally slightly better than projected in the November 2010 Fiscal Monitor. Overall emerging economy fiscal deficits were broadly in line with November forecasts, but there were some significant deviations at the country level.
Their average headline deficit in 2010 is projected at about four percent of GDP, 0.75 percentage point lower than in 2009, leaving the average gross general government debt broadly stable at about 37 percent of GDP.
The average cyclically adjusted deficit in 2010 was almost unchanged from the previous year. As in advanced economies, revenue collection exceeded expectations, reflecting mainly stronger growth and higher commodity prices, and in some cases sizable one-off receipts, notably the sale of oil concessions in Brazil and auction of telecommunication licenses in India, the IMF said.
Higher revenues, however, were generally used to finance higher spending. In partly reflecting this, fiscal balances in several key economies, most notably Brazil, China, and India, turned out weaker than projected in the November Monitor, it said.
