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Figure 1.12. General Government Fiscal Balances and Public Debt (Percent of GDP unless noted otherwise) Fiscal deficits and public debt are very high in many advanced economies. Although policy became much less stimulatory in 2010, real GDP growth picked up, suggesting a handoff from public to private demand. For 2011, fiscal consolidation is expected to be modest in advanced economies. As a result, the adjustment required to achieve prudent debt levels by 2030 remains very large. Fiscal adjustment will be larger in economies with high external surpluses than in economies with high deficits, which is consistent with widening global imbalances. 2 Fiscal Balance 0 Public Debt 120 Advanced economies Emerging and developing economies -2 80 G7 -4 -6 World Advanced economies -10 1980 90 2000 10 16 2 Fiscal Impulse Advanced economies Emerging economies 1 October 2010 WEO 0 -1 -2 2009 10 11 14 Required Adjustment 1,3 12 10 60 40 Emerging and developing economies 20 World -8 -3 100 1950 60 70 80 90 2000 10 16 0 300 Public Debt, 20161 150 250 125 200 100 150 75 100 50 50 25 0 JP2 IT US FR GB ES CA DE 0 Structural Fiscal Balance Projected adjustment, 2010–15 3 2 8 1 6 0 4 2011 change 2011–16 change 2 0 4 JP US GB ES FR CA IT DE Excessive Excessive Aligned 4,7 external external surpluses4,5 deficits4,6 Sources: IMF, Fiscal Monitor; and IMF staff calculations. 1CA: Canada, DE: Germany, ES: Spain, FR: France, GB: United Kingdom, IT: Italy, JP: Japan, US: United States. 2Left scale for Japan. 3Cyclically adjusted primary balance adjustment needed to bring the debt ratio to 60 percent by 2030. For Japan, the scenario assumes a reduction in net debt to 80 percent of GDP; this corresponds to a gross debt target of about 200 percent of GDP. 4 Based on the IMF staff’s Consultative Group on Exchange Rate Issues (CGER). CGER economies include Argentina, Australia, Brazil, Canada, Chile, China, Colombia, Czech Republic, euro area, Hungary, India, Indonesia, Israel, Japan, Korea, Malaysia, Mexico, Pakistan, Poland, Russia, South Africa, Sweden, Switzerland, Thailand, Turkey, United Kingdom, and United States. For a detailed discussion of the methodology for the calculation of exchange rates’ over- or undervaluation, see Lee and others (2008). 5 These economies account for 18.5 percent of global GDP. 6 These economies account for 27.4 percent of global GDP. 7 These economies account for 39.2 percent of global GDP. -1 -2