Questions monétaires et financières

Prospects for growth and imbalances beyond the short term


Prospects for growth and imbalances in the short term

The global crisis has left the OECD area with lower potential output and a high government debt burden. Moreover, global imbalances are beginning to widen again. A combination of fiscal consolidation and structural reforms is needed to put the global economy on a stronger, more balanced and sustainable growth path in the years to come.

Policy scenarios

Using its Global Model, the OECD has carried out a number of simulations that examine the longer-term effects of different policies on economic growth, public finances and global imbalances. This exercise contributes to the G20 process by shedding light on the policy levers that can be used to promote strong, sustainable and balanced growth.

The simulations show that:

  •  A business-as-usual scenario, based on gradual fiscal consolidation to stabilise the ratio of government indebtedness to GDP, would fail to create a strong, sustainable and balanced global economy. Global imbalances would continue rising as the recovery takes hold (Figure).
  •  Fiscal consolidation to bring government debt down to pre-crisis levels by 2025 would fail to bring about a sustained reduction in global imbalances. This is essentially because of the simultaneity of consolidation across the OECD area.
  •  However, global imbalances would be reduced in a sustainable manner through a mix of fiscal consolidation and structural reforms to raise saving in countries with large current account deficits and rebalance demand towards domestic sources in countries with large surpluses.

Comparison of the different policy scenarios shows that addressing global imbalances does not require any significant redistribution of world growth across countries/regions, but instead a rebalancing of the sources of growth within countries/regions.


 Structural reform can do much to reduce global current-account imbalances
Index 2007 = 100

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1.  Fiscal consolidation including exchange rate response.
Note:  A summary measure of global current account imbalances is constructed as an absolute sum of the current balances in each of the main trading countries or regions expressed as a share of world GDP. This is then converted to an index so that the pre-crisis level of imbalances in 2007 is equal to 100.
Source: OECD calculations.



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