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WORLD ECONOMIC AND FINANCIAL SURVEYS World Economic Outlook Public Debt in Emerging Markets September 2003

A Survey by the Staff of the International Monetary Fund

©2003 International Monetary Fund

The World Economic Outlook presents the IMF staff's analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF's global surveillance activities.

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Contents
661k pdf file	Assumptions and Conventions
	Preface
	Foreword
Chapter I.  607k pdf file	Economic Prospects and Policy Issues
	North America: Can the United States Remain the Engine of Global Growth?
	Western Europe: Prolonged Weakness with Tentative Signs of a Turnaround
	Japan: Bold Measures Needed to Accelerate Restructuring and End Deflation
	Latin America: Emerging Stability Provides Opportunity to Accelerate Crisis-Proofing
	Asia-Pacific Region: Greater Exchange Rate Flexibility Needed for More Balanced Growth
	European Union Candidates: Coping with Weakness in the Euro Area
	Commonwealth of Independent States: Structural Reforms Key to Sustaining the Growth Upswing
	Middle East: Fiscal Reforms Key to Stability and Higher Growth
	Africa: Growth Has Been Resilient But Still Far Too Low
	Appendix 1.1. Longer-Term Prospects for Oil Prices
	Appendix 1.2. Nonenergy Commodity Prices and Semiconductor Markets
	References
	Boxes
	1.1	Recent Changes in Monetary and Financial Conditions in the Major Currency Areas
	1.2	How Should We Measure Global Growth?
	1.3	Managing Increasing Aid Flows to Developing Countries
	1.4	Rebuilding Post-Conflict Iraq
	1.5	Gulf Cooperation Council: Challenges on the Road to a Monetary Union
	Tables
	1.1	Overview of the World Economic Outlook Projections
	1.2	Emerging Market Economies: Net Capital Flows
	1.3	Advanced Economies: Real GDP, Consumer Prices, and Unemployment
	1.4	Selected Economies: Current Account Positions
	1.5	Major Advanced Economies: General Government Fiscal Balances and Debt
	1.6	Selected Western Hemisphere Countries: Real GDP, Consumer Prices, and Current Account Balance
	1.7	Selected Asian Economies: Real GDP, Consumer Prices, and Current Account Balance
	1.8	European Union Candidates: Real GDP, Consumer Prices, and Current Account Balance
	1.9	Commonwealth of Independent States: Real GDP, Consumer Prices, and Current Account Balance
	1.10	Selected Middle Eastern Countries: Real GDP, Consumer Prices, and Current Account Balance
	1.11	Selected African Countries: Real GDP, Consumer Prices, and Current Account Balance
	1.12	Oil Reserves and Production
	Figures
	1.1	Global Indicators
	1.2	Current and Forward-Looking Indicators
	1.3	Fiscal and Monetary Easing in the Major Advanced Countries
	1.4	Developments in Mature Financial Markets
	1.5	Emerging Market Financial Conditions
	1.6	Selected Countries: Exchange Rate and Interest Rate Developments
	1.7	Global Outlook
	1.8	How Much Do Developed Country Policies Help Developing Countries?
	1.9	United States: Household Balance Sheets
	1.10	United States: Return of the Twin Deficits
	1.11	Euro Area: A Relatively Weak Cyclical Upturn
	1.12	Japan: Monetary, Financial, and Fiscal Indicators
	1.13	Selected Western Hemisphere Countries: Economic Activity, Financial Indicators, and Public Debt
	1.14	Asia: Composition of Growth, Exchange Rate Volatility, and Reserves
	1.15	Selected European Union Accession Countries: Impact of Euro Area and Euro Appreciation
	1.16	Real GDP, Investment, and Structural Reforms in the CIS Countries
	1.17	Oil Price Cycles and Fiscal Policy in the Middle East
	1.18	Downturns in Advanced Countries, and Reforms and Growth in Sub-Saharan Africa
	1.19	Oil Prices and Consumption
	1.20	Oil Inventories
	1.21	Global Economic Growth and Oil Prices
	1.22	Historical Oil Price Forecasts
	1.23	Nonenergy Commodities and Semiconductors
Chapter II.  417k pdf file	Three Current Policy Issues in Developing Countries
	How Can Economic Growth in the Middle East and North Africa Region Be Accelerated?
	Are Foreign Exchange Reserves in Asia Too High?
	How Concerned Should Developing Countries Be About G-3 Exchange Rate Volatility?
	Appendix 2.1. Economic Growth in the Middle East and North Africa Region: Definitions, Data Sources, and Country Coverage
	Appendix 2.2. How Concerned Should Developing Countries Be About G-3 Exchange Rate Volatility? Data and Modeling Strategy
	References
	Boxes
	2.1	Accounting for Growth in the Middle East and North Africa
	2.2	Measuring Foreign Reserves
	2.3	Reserves and Short-Term Debt
	Tables
	2.1	Growth Regression Results
	2.2	Simple Regressions of Reserves on Explanatory Variables
	2.3	Multiple-Variable Regression Results for Reserves
	2.4	Benefits of Eliminating Consumption Volatility (Upper Bounds)
	2.5	Illustrative Sterilization Costs
	2.6	Selected Emerging Market Countries: Sources of Reserve Accumulation, 2001–02
	2.7	Impact of Exchange Rate Volatility on Trade and on Emerging Market Capital Inflows
	2.8	Determinants of Exchange Rate Crises
	2.9	Global Economy Model Simulations: How Various Emerging Market Characteristics Increase or Reduce the Impact of G-3 Real Exchange Rate (RER) Volatility
	2.10	Selected Summary Statistics
	Figures
	2.1	MENA Growth Performance in Comparison
	2.2	Regional Comparison of Growth Determinants: Macroeconomic and Trade Policy Indicators, 1980–2000
	2.3	Trade Restrictiveness Measure, 1997–2002
	2.4	Regional Comparison of Growth Determinants: Terms of Trade Volatility, Institutional Quality, Demographics, and Secondary Education, 1980–2000
	2.5	Institutional Quality, 1984–2000
	2.6	Decomposition of Growth Differentials Among Subgroups of MENA and East Asian Countries
	2.7	Indicators of Internal and External Conflict, 1984–2000
	2.8	Foreign Exchange Reserves
	2.9	Share of Global Reserves
	2.10	Selected Emerging Economies: Exchange Rate Regimes
	2.11	Selected Emerging Economies: Reserve Accumulation
	2.12	Selected Emerging Economies in Asia: Reserve Accumulation
	2.13	Selected Emerging Economies in Asia: Actual and Predicted Reserves
	2.14	Selected Emerging Economies in Latin America: Actual and Predicted Reserves
	2.15	Selected Other Emerging Economies: Actual and Predicted Reserves
	2.16	Industrial Country Real Exchange Rate (RER) Volatility
	2.17	Share of Countries on a Hard or Crawling Peg
	2.18	Volatility in Industrial Countries' Real Exchange Rates (RERs) and Developing Countries' Real Effective Exchange Rates (REERs)
	2.19	Volatility and Misalignment of Developing Countries' Real Effective Exchange Rates (REERs)
	2.20	Correlation Between the Structure of Trade Links and of Financial Links
	2.21	Developing Country Real Effective Exchange Rate (REER) Volatility
	2.22	Yen/Dollar Real Exchange Rate, and Real Effective Exchange Rates (REERs) in East Asia
	See Also: Video Webcast: How Economic Growth in the Middle East and North Africa Region Can Be Accelerated? By Dalia Hakura Economist, Research Department (first essay in Chapter II) Transcript Video Webcast: Are Foreign Reserves in Asia too High? By Hali Edison, Senior Economist, Research Department (second essay in Chapter II) Transcript Video Webcast: How Concerned Should Developing Countries Be About G-3 Exchange Rate Volatility? By Nikola Spatafora, Economist, Research Department (third essay in Chapter II) Transcript
Chapter III.  356k pdf file	Public Debt in Emerging Markets: Is It Too High?
	Public Debt and Fiscal Policy in Emerging Market Economies
	Assessing the Sustainability of Public Debt in Emerging Market Economies
	How Can Public Debt Levels Be Reduced?
	Conclusions
	Appendix 3.1. Assessing Fiscal Sustainability: Data and Econometric Methods
	References
	Boxes
	3.1	Data on Public Debt in Emerging Market Economies
	3.2	Fiscal Risk: Contingent Liabilities and Demographics
	3.3	Assessing Fiscal Sustainability Under Uncertainty
	3.4	The Case for Growth-Indexed Bonds
	Tables
	3.1	Emerging Market Economies: Fiscal Policy Reaction Functions, 1990–2002
	3.2	Industrial Economies: Fiscal Policy Reaction Functions, 1990–2002
	3.3	Expenditure Equations, 1990–2002
	3.4	Overborrowing and Institutions: Bivariate Regression Results
	3.5	Determinants of Overborrowing
	Figures
	3.1	Public Debt in Emerging Market Economies
	3.2	Comparison of Public Debt Levels in Emerging Market and Industrial Economies
	3.3	Emerging Market Economies: Contributions to the Change in the Public Debt Stock Since 1997
	3.4	Fiscal Balance in Emerging Market Economies
	3.5	Debt Default and Public Debt Ratios
	3.6	Revenue Ratios and Effective Tax Rates in Emerging Market and Industrial Economies
	3.7	Volatility of Revenues and Effective Tax Rates in Emerging Market and Industrial Economies
	3.8	Emerging Market and Industrial Economies: Actual and Debt Stabilizing Primary Balances
	3.9	Relationship Between Public Debt and the Primary Balance
	3.10	Emerging Market and Industrial Economies: Sensitivity of Fiscal Policy to the Business Cycle
	3.11	Do Governments in Emerging Market Economies Overborrow?
	3.12	Maximum Ratios of Sustainable Public Debt to GDP
	3.13	Ratios of Revenue and Public Debt to GDP
	3.14	How Do Emerging Market Countries Reduce Their Debt?
	See Also: Video Webcast: Public Debt in Emerging Markets: Is It Too High? By Tim Callen, Deputy Division Chief, Research Department ( Chapter III) Transcript
159k pdf file	Annex: Summing Up by the Acting Chair
550k pdf file	Statistical Appendix
	Assumptions
	What's New
	Data and Conventions
	Classification of Countries
	General Features and Compositions of Groups in the World Economic Outlook Classification
	List of Tables
	Output (Tables 1–7)    Inflation (Tables 8–13)    Financial Policies (Tables 14–21)    Foreign Trade (Tables 22–26)    Current Account Transactions (Tables 27–32)    Balance of Payments and External Financing       (Tables 33–37)    External Debt and Debt Service (Tables 38–43)    Flow of Funds (Table 44)    Medium-Term Baseline Scenario (Tables 45–46)
	Box
	A1	Economic Policy Assumptions Underlying the Projections for Selected Advanced Economies
World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics