Saturday, June 19, 2010

Snapshot of global imbalances

The role of global macroeconomic imbalances, manifested most saliently in the current account surpluses and deficits of the emerging and developed economies respectively, has been discussed extensively here, here, here, here and here. A recent Vox article by Kati Suominen has a superb graphic that captures global build-up of imbalances for the 1996-2015 period, with respective contributions of the major economies. The graphic projects that the imbalances are set to persist, albeit at a slightly lower level.

The US, UK, Canada, Australia, India, Turkey, France, and southern European nations form the deficit side of the global macroeconomic balance, while China, Japan, emerging East Asia, Germany, and oil producing nations form the surplus side.


Vamsi M Maganti said...

Thanks for the snapshot! It's a very very very good representation.

On a different note: The country's existing deficit leaves no fiscal space for new government spending on areas of high social priority. While making sure that their personal balance does take leaps and bounds - never letting it slip to a deficit..:)..our officials also need to focus on the country's deficit.

Anyways - While some state governments, though very few, are taking initiatives in rural and urban infrastructure, employment, education, rural health - it will be very interesting to watch how they have to finance the spending on the same with some combination of higher taxes or user charges, or by cutting existing expenditures. I would vote for the third.

gulzar said...

vamsi, thanks for all your comments

Indian government may be blessed with two strokes of fiscal good fortune. one, the recently concluded 3G and wireless broadband auctions have swelled the coffers by more than Rs 1 lakh crore. another Rs 1.5 lakh crore is expected from divestment of government stake in PSUs due to the recently announced decision making 25% public float mandatory for listed companies.

the Rs 2.5 lakh crore windfall, while partially used to lower the fiscal deficit, can be used for spending on important areas like agriculture, rural and urban infrastructure. however, there is the ever-present danger that it could also get frittered away on populist social spending.