A short addendum to my previous post:
I checked the most recent IMF projections in the June 2011 Update to the Fiscal Monitor.
Table 1 provides estimates of changes in the general government cyclically adjusted balance in per cent of potential GDP. Basically, changes are the result of discretionary changes in fiscal policy rather than due to improvement or deterioration of the economy.
The Canadian balance is forecast to fall from a peak of -4.0% in 2010 to -2.9% in 2011 to -2.2% in 2012 -- a decline of 1.8 percentage points since stimulus measures came to an end. The report notes that provincial spending has been cut by more than anticipated.
The balance for all advanced economies is forecast to fall from the peak of -5.6% in 2010 to -5.1% in 2011 to -4.2% in 2012 -- a decline of 1.4 percentage points.
The Euro-area balance is forecast to fall by 1.7 percentage points 2010 to 2012, and the U.S. balance is forecast to fall by 1.4 percentage points over the same two-year period.
So, our dose of austerity is a bit more stringent than the norm for the advanced economies, even though our debt situation is much better than the average.
The table does show that, among the G8 countries for which estimates are provided, fiscal austerity is most stringent in Spain (-3.4 percentage points) and the U.K. (-2.9 percentage points 2010-2012).
This article was first posted on The Progressive Economics Forum.
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