Stimulating Times

I was drawn to this very interesting graphic from the latest IMF report on the state of government (fiscal) finances in countries around the world.

Many countries have introducing a deliberate fiscal stimulus designed to bolster demand and confidence whilst the financial markets were in semi-meltdown and the real economy was contracting. But there are many different fiscal options - from cutting employment taxes, lowering indirect taxes on spending, increases in transfer payments, subsidies and bail-outs to big infrastructure projects. The IMF graphic shows how China has focused almost entirely on public sector investment as the lynchpin of their stimulus programme. In other countries the emphasis has been on increasing government consumption or providing tax incentives for domestic consumer and business spending. Going forward the issue becomes the timing and extent of any clawback or exit strategy - when should a stimulus be withdrawn and how quickly? Download the IMF report here.

The BBC also has an excellent guide to The cost of the financial meltdown: Deficits and spending - a hat tip to Penny for spotting this.