COVID-19 crisis will test Ghanaian fiscal discipline

2020 ◽  
Keyword(s):  
Current Account ◽  
Fold Increase ◽  
Gdp Growth ◽  
Fiscal Deficit ◽  
Economic Shocks ◽  
Election Cycle ◽  
Fiscal Discipline ◽  
Debt Sustainability ◽  
Content Type ◽  
Current Account Deficits

Subject Ghanaian economic shocks. Significance GDP growth is expected to slow to 1.5% this year, compared with the 5.8% expected before the onset of the COVID-19 pandemic -- the lowest level in nearly four decades. Similarly, key macroeconomic metrics such as the fiscal and current account deficits, government revenues and inflation are all set to deteriorate sharply. This could be temporary but the COVID-19 crisis amid an election cycle will heighten spending pressures. Impacts Although progress towards debt sustainability will suffer, Accra will likely avoid a ratings downgrade by keeping interest costs stable. The higher fiscal deficit in 2020 could obscure additional loosening of the fiscal stance ahead of elections in December. The more than seven-fold increase in COVID-19 cases since the lockdown was eased risks damaging improving sentiment towards Ghanaian assets.

Zambia's effort to avoid IMF bailout faces headwinds

2015 ◽  
Keyword(s):  
Rural Areas ◽  
Urban Areas ◽  
Food Prices ◽  
General Election ◽  
Gdp Growth ◽  
Fiscal Deficit ◽  
Economic Shocks ◽  
State Budget ◽  
Content Type ◽  
Finance Minister

Subject Outlook for the Zambian budget. Significance On October 9, finance minister Alexander Chikwanda presented the 2016 state budget. It predicts strong GDP growth (4.6%) and targets a narrower fiscal deficit (from 6.9% to 3.8% next year), both positive signals to reassure donors, investors and ratings agencies. However, with a general election looming in less than a year and a confluence of economic shocks, his optimistic outlook rings hollow. Impacts Lungu's slim (1.7%) victory in the January presidential by-election increases his vulnerability to populist expenditure pressures. However, the effects of the economic crunch (such as higher food prices) will be worst in urban areas -- not his core constituency. Social and infrastructure spending such as the roads programme will instead focus on rural areas. Opposition divisions, along with backing from former presidents and the Daily Nation newspaper, increase his chances for re-election.

Eurogroup deal will do little for Greek GDP growth

2016 ◽  
Keyword(s):  
Economic Growth ◽  
Euro Area ◽  
Gdp Growth ◽  
Economic Uncertainty ◽  
Short Term ◽  
Fiscal Discipline ◽  
Foreign Investors ◽  
Debt Sustainability ◽  
Content Type ◽  
Growth Prospects

Significance The negotiations with Greece's creditors revealed fundamental disagreements in lenders' views on the sustainability of Greece's debt and failed to address the drivers of future economic growth, once again concentrating almost exclusively on fiscal discipline. In the short term, the deal helps lift economic uncertainty and gains room to manoeuvre. The fact that debt relief measures were put on the table handed a domestic political victory to the ruling Syriza party. Impacts The IMF's drastic reassessment of debt sustainability and downward revision of Greece's growth prospects will deter foreign investors. Additional austerity measures will discourage already weak Greek 'ownership' of the programme, hindering reform progress. Polls suggest Greeks are slowly becoming more sceptical about participation in the euro-area.

scholarly journals The Relationship between Current Account Deficits and Growth in Montenegro: ARDL Bounds Testing Approach

2018 ◽  
Vol 7 (3) ◽  
pp. 5-24 ◽  
Author(s):  
Mustafa Özer ◽  
Jovana Žugić ◽  
Sonja Tomaš-Miskin
Keyword(s):  
Growth Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Gdp Growth ◽  
Bounds Testing ◽  
Current Account Deficits ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Short Run ◽  
The Relationship

Abstract In this study, we investigate the relationship between current account deficits and growth in Montenegro by applying the bounds testing (ARDL) approach to co-integration for the period from the third quarter of 2011 to the last quarter of 2016. The bounds tests suggest that the variables of interest are bound together in the long run when growth is the dependent variable. The results also confirm a bidirectional long run and short run causal relationship between current account deficits and growth. The short run results mostly indicate a negative relationship between changes in the current account deficit GDP ratio and the GDP growth rate. This means that any increase of the value of independent variable (current account deficit GDP ratio) will result in decrease of the rate of GDP growth and vice versa. The long-run effect of the current account deficit to GDP ratio on GDP growth is positive. The constant (β0) is positive but also the (β1), meaning that with the increase of CAD GDP ratio of 1 measuring unit, the GDP growth rate would grow by 0,5459. This positive and tight correlation could be explained by overlapping structure of the constituents of CAD and the drivers of GDP growth (such as tourism, energy sector, agriculture etc.). The results offer new perspectives and insights for new policy aiming for sustainable economic growth of Montenegro.

scholarly journals Explaining India’s current account deficit: a time series perspective

2019 ◽  
Vol 26 (1) ◽  
pp. 117-138
Author(s):  
Harendra Kumar Behera ◽  
Inder Sekhar Yadav
Keyword(s):  
Current Account ◽  
Unit Root ◽  
Current Account Deficit ◽  
Structural Break ◽  
Current Account Balance ◽  
Fiscal Deficit ◽  
Causality Test ◽  
Content Type ◽  
Financial Account ◽  
Cointegration Tests

Purpose The purpose of this paper is to examine the issue of high current account deficit (CAD) from various perspectives focussing its behaviour, financing pattern and sustainability for India. Design/methodology/approach To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger non-causality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM. Findings The study found that the widening of CAD is due to fall in household financial savings and corporate investments. Also, it was found that a large part of India’s CAD has been financed by FDI and portfolio investments which are partly replaced by short-term volatile flows. The unit root and cointegration tests indicate a sustainable current account for India. Further, econometric analysis reveals that India’s current account is driven by fiscal deficit, terms of trade growth, inflation, real deposit rate, trade openness, relative income growth and the age dependency factor. Practical implications Since India’s CAD has widened and is expected to widen primarily due to rise in gold and oil imports, policy makers should focus on achieving phenomenal export growth so that a sustainable current account is maintained. Also, with rising working-age and skilled population, India should focus more on high-value product exports rather than low-value manufactured items. Further, on the structural side it is important to correct fiscal deficit as it is one of the important factors contributing to large CAD. Originality/value The paper is an important empirical contribution towards explaining India’s CAD over time using latest and comprehensive data and econometric models.

Russia can expect only limited GDP growth

2017 ◽  
Keyword(s):  
Interest Rate ◽  
Presidential Election ◽  
Policy Making ◽  
Slow Growth ◽  
Gdp Growth ◽  
Fiscal Discipline ◽  
Content Type ◽  
The Cost ◽  
Ukraine Crisis ◽  
Competition For Resources

Significance First-quarter GDP data show that the economy is stabilising after two years of recession. Obstacles to continued growth emerged before either the Ukraine crisis or the fall in global prices, and much of the thinking in policy-making circles is about how to address them. Impacts The austerity regime may be softened later this year to allow spending ahead of the March 2018 presidential election. If fiscal discipline is broadly maintained, military spending in real terms will be held below 2015 levels for at least two years. The key interest rate will follow the rate of inflation down, easing the business community's concern about the cost of finance. Continued slow growth will intensify competition for resources among elite groups, creating possible sources of political instability.

India’s growth will be fragile

2018 ◽  
Keyword(s):  
Stock Market ◽  
Current Account ◽  
Prime Minister ◽  
Current Account Deficit ◽  
General Election ◽  
Gdp Growth ◽  
Economic Downturn ◽  
Hindu Nationalism ◽  
Content Type ◽  
The Current Account

Subject Outlook for India's GDP growth. Significance India’s GDP statistics point to robust growth and its stock market indices suggest a boom. Yet inflation is high, the current account deficit is widening, the rupee has depreciated and investors are increasingly wary. Impacts Prime Minister Narendra Modi will highlight India’s growth figures in campaigning for a second term early next year. Opposition parties will push back on Modi by suggesting India’s growth is largely ‘jobless’. Any sign of an economic downturn prior to the general election could prompt Modi to appeal more to Hindu nationalism to garner support.

Lebanese protests will tighten the economic trap

2019 ◽  
Keyword(s):  
Emerging Markets ◽  
Current Account ◽  
Financial Support ◽  
Currency Crisis ◽  
The Political ◽  
Political Class ◽  
Content Type ◽  
Current Account Deficits

Significance Lebanon’s debt is reaching unsustainable levels, meaning politicians can no longer delay addressing longstanding structural fiscal and current account deficits. However, public rejection of the political class is mounting. Impacts The return of Gulf tourists to Lebanon could hurt alternative destinations such as Jordan. Gulf donors’ efforts to condition financial support on disengagement from Iran will fail, but could limit disbursement. If Lebanon suffers a debt and currency crisis, this could spread to other emerging markets. Raising a planned 2-billion-dollar bond will be extremely challenging.

Mexico’s 2020 budget looks highly optimistic

2019 ◽  
Keyword(s):  
Economic Growth ◽  
Central Bank ◽  
Interest Rates ◽  
Oil Price ◽  
Gdp Growth ◽  
Fiscal Deficit ◽  
Limited Effect ◽  
Content Type ◽  
National Budget ◽  
National Economic

Significance The package comprises the national budget and revenue legislation, as well as key domestic and international macroeconomic assumptions and projections. Impacts Even if GDP growth remains poor, fiscal loosening is unlikely. The central bank may lower interest rates further to help boost the economy, but the effect of a monetary push would be relatively minor. Major projects such as the Maya Train may have some regional impact but will have a limited effect on national economic growth. Legislators may increase the expected oil price for 2020 to boost spending in some areas without increasing the fiscal deficit target.

India will struggle to rein in fiscal deficit

2021 ◽  
Keyword(s):  
Public Health System ◽  
Well Being ◽  
Tax Revenue ◽  
Gdp Growth ◽  
Fiscal Deficit ◽  
Content Type ◽  
The Public ◽  
Glide Path ◽  
The Government ◽  
Health And Well Being

Significance The fiscal deficit is projected to be 9.5% of GDP in 2020/21 -- compared with a budgeted 3.5% -- narrowing to 6.8% in 2021/22 and 4.5% by 2025/26. The government is counting on increased tax revenue and receipts from divestment to help it stick to this fiscal ‘glide path’. Impacts Increased spending on health and well-being should at least create more jobs in the public health system. Delhi will count on a return to high levels of GDP growth to help reduce the government debt-to-GDP ratio. The government may find it difficult to realise its goal of pushing through privatisation of Air India within the first half of 2021/22.

Twin deficits hypothesis in Bangladesh: an empirical investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sima Rani Dey ◽  
Mohammad Tareque
Keyword(s):  
Current Account ◽  
Budget Deficit ◽  
Good Governance ◽  
Current Account Deficit ◽  
Trade Deficit ◽  
Fiscal Deficit ◽  
Twin Deficits ◽  
Content Type ◽  
Long Run ◽  
The Current Account

PurposeThis study attempts to examine the twin deficits hypothesis for Bangladesh. Along with the traditional twin deficits hypothesis associated with the current account and fiscal deficit, the paper also explores the causal relationship between the trade deficit and fiscal deficit.Design/methodology/approachWe start with the investigation of the conventional twin deficit hypothesis employing autoregressive distributed lag (ARDL) bounds testing approach in a multivariate framework. Due to the absence of cointegration between the budget deficit and trade deficit, the study adopts a multivariate vector autoregressive (VAR) model to analyze the nexus.FindingsThe study supports the presence of the twin deficits hypothesis in Bangladesh, both in the short run and long run. Unidirectional causation running from the budget deficit to the current account deficit in the long run. The trade model also supports the twin deficit hypothesis, like the aforementioned current account model.Practical implicationsTherefore, the sustainable fiscal deficit is the key to maintain a stable current account deficit and trade deficit in Bangladesh.Originality/valueThe study incorporates the country risk indicators to address the governance issue while analyzing the models' deficit scenarios because good governance is an integral part of explaining the development outcome and failure of a country like Bangladesh.

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