Are advanced economies at risk of falling into debt traps?
The gross general government debt-to-GDP ratios in many advanced economies have reached the highest levels in peacetime history and continue to grow, putting into question sovereign solvency in these economies.
In case of new adverse shocks, whether economic or political, global or country-specific, which result in the deterioration of growth prospects or higher real interest rates, or both, the situation could easily get out control.
Apart from the risk of sovereign default, excessive public debt might also have a negative impact on the stability of financial sector and on economic growth in the medium and long term.
Debt sustainability simulations for the group of highly-indebted advanced economies – those in which the general government gross public debt-to-GDP ratio exceeded 80 percent in 2015 – suggest that benefits of the current record-low interest rates and post-crisis growth recovery should be used for fiscal consolidation.
The aim of this should be not only to stop further expansion of debt-to-GDP ratios, but also to gradually reduce them. Such corrective measures are needed in six out of seven G7 members (Germany being the exception) and in 10 out of 19 euro-area members. The fiscal situation of Japan, where gross debt has reached 250 percent of GDP, is particularly precarious.
In addition, unless there are reforms of public pension, health and long-term care systems, fiscal consolidation in advanced economies must also create room for the higher spending levels in these areas that will result from aging populations.
The paper presents an analysis of the G20 summit held under the French Presidency in Cannes on November 3rd and 4th 2011. The author assesses the summit agenda and decisions made by the leaders in the key areas of coordination, including the strategy for growth and jobs, reform of the international monetary system, actions to restore financial stability and strengthen the medium-term foundations for growth, deepening of financial sector reform, fight against corruption, investing for global growth. The paper highlights the challenge of implementing two agendas: the planned and the anti crisis one. The conclusion sums up the strengths and weaknesses of the summit and the G20 summitry, reviews the features of the G20 institutionalization, makes a forecast for the sequence of presidencies after 2015, and puts forward brief recommendations for the Russian G20 presidency in 2013. The publication is prepared within the framework of a joint project of Russian International Affairs Council (RIAC) Project and International Organizations Research Institute of the NRU HSE "Increasing Effectiveness of Russia's Participation in G8, G20 and BRICS in accordance with Russian Priorities and National Interests".
We expect economic growth to remain strong in Poland and Latvia in 2016. Despite this robust growth, the new Polish government is likely to soften monetary and fiscal policies to further stimulate the economy, in our view. In 2015, the Latvian economy demonstrated strong resilience to external shocks.
Since 2008, the world economy has been facing consequences of the global financial crisis. One of them is rapid growth in public debt in most advanced economies, which resulted from an overoptimistic estimate of fiscal situation before the crisis, declining government revenue and increasing social expenditure during the crisis, costs of the banking system restructuring, countercyclical fiscal policies, etc.
For this reason, many governments are trying to determine a ‘safe’ level of fiscal deficit and public debt. However, this is not an easy task. There is no single standard of fiscal safety for all economies. Besides, a globalized economy and irregular business cycle make it difficult to find out in which phase of the cycle a given economy is at the moment, while this is essential to assess fiscal indicators.
Historical experience shows that default risk may materialize at different levels of public debt, sometimes seemingly very low. In fact, a ‘safe’ borrowing level is country-specific and depends on many factors and often unpredictable circumstances. However, given the tense situation in global markets, the ‘safe’ level of public debt is lower than it used to be a decade ago. Another argument for a cautious approach concerns a highly pro-cyclical nature of such measures as the fiscal deficit to GDP or public debt to GDP ratios.
Lessons of the latest crises also indicate importance of more accurate estimation of countries’ contingent fiscal liabilities, particularly of those relating to the stability in the financial sector. If looking into the future, a correct estimation of other contingent liabilities, particularly those related to social welfare systems (implicit debt of the public pension and health systems) are of primary importance in the context of the ageing society and population decline. These liabilities far exceed official statistics on the public debt in some counties. As a result, such statistics does not present an adequate picture of the nation's public debt and actual fiscal burden that will be imposed on the shoulders of the following generations of taxpayers.
One consequence of the recent global financial crisis has been the rapid growth of public debt in advanced economies, which has reached record-high peacetime levels. Emerging market and developing economies appeared more resilient immediately after the 2008-2009 crisis; however, declining commodity prices and decelerating growth during 2014-2016 have weakened their fiscal positions.
Faced with a growing debt burden, many governments have attempted to determine the ‘safe’ level of fiscal deficit and public debt. However, there is no single standard of fiscal safety for all economies. Experience shows that default risk may occur at various levels of public debt. In fact, a ‘safe’ borrowing level is country specific and depends on many factors and often-unpredictable circumstances.
Lessons from the latest crises also highlight the importance of more accurate estimations of contingent fiscal liabilities, namely those relating to the stability of the financial sector. Looking ahead, estimations of other contingent liabilities, particularly those related to social welfare systems (the implicit debts of the public pension and health systems) are of primary importance in the context of an aging society and a population decline.
This paper studies fiscal policy in Russia 2004–2010 with the aid of structural budget balance and fiscal impulse measures. To check for robustness several methods estimating the potential GDP are employed. The research suggests a hypothesis that the output in Russia is subject to two types of shocks: persistent outward shocks and short-term internal shocks. In 2004–2010, fiscal policy coped with the internal shocks but could not smooth outward instability. Fiscal policy in Russia is procyclical; it does not stabilize the output.
Authorities of the state regulation, creditors and investors are interested in getting reliable information about the banking sector activities. The procedure of bank financial soundness and accountability evaluation is carried out by supervision authorities as well as by international and national rating agencies. The analysis of the methodologies of bank accountability evaluation and forecasting in Russia shows the following results. The Bank of Russia makes decisions on banks financial soundness based on financial coefficients of different groups; the calculations are grounded on the official bank statements. Apart from financial indicators, rating agencies evaluate qualitative parameters of the bank activities. The common problem of the bank financial accountability analysis in Russia is the lack of use of the forecasting methods predicting the financial statement of banks and the probability of default. As a result, the problem-free banks corresponding to the demands of the supervision authorities on standards were considered to be problematic during the crisis. The aim of this research is the dynamic analysis of the main indicators of the Russian banks activities at the different stages of the economic cycle in order to identify the indicators of the early bankruptcy prediction and the opportunity to forecast the changes in the bank financial statement.
Smoking is a problem, bringing signifi cant social and economic costs to Russiansociety. However, ratifi cation of the World health organization Framework conventionon tobacco control makes it possible to improve Russian legislation accordingto the international standards. So, I describe some measures that should be taken bythe Russian authorities in the nearest future, and I examine their effi ciency. By studyingthe international evidence I analyze the impact of the smoke-free areas, advertisementand sponsorship bans, tax increases, etc. on the prevalence of smoking, cigaretteconsumption and some other indicators. I also investigate the obstacles confrontingthe Russian authorities when they introduce new policy measures and the public attitudetowards these measures. I conclude that there is a number of easy-to-implementanti-smoking activities that need no fi nancial resources but only a political will.
One of the most important indicators of company's success is the increase of its value. The article investigates traditional methods of company's value assessment and the evidence that the application of these methods is incorrect in the new stage of economy. So it is necessary to create a new method of valuation based on the new main sources of company's success that is its intellectual capital.