Despite progress in addressing key fiscal weaknesses in many countries like India and China, the global fiscal environment remains subject to a high degree of risk, according to the International Monetary Fund (IMF).
Driven by declines of close to one percent in China and India, cyclically adjusted deficits are projected to fall this year in emerging Asia, the global financial institution said on the September 2011 Fiscal Monitor Report (FM) released here Tuesday.
Some fiscal adjustment is under way in emerging economies this year, especially in Asia and Europe, and this is projected to continue in 2012.
Although conditions in emerging economies generally remain healthier than in advanced economies, risks in some emerging economies may be on the rise, the IMF said.
Thus, continued fiscal adjustment remains appropriate and in some cases would need to be accelerated, it said, noting inflationary pressures and widening current account deficits in several key emerging economies, including Argentina, India, and Turkey.
Medium-term fiscal adjustment needs also vary significantly and are largest in India, where the cyclically adjusted primary deficit is highest, the IMF said.
Debt ratios in emerging economies remain, on average, significantly lower than in advanced economies, although with some significant exceptions.
Indeed, countries including Brazil, Hungary, and India each have debt ratios that exceed 60 percent of GDP, the IMF noted.
Separately, revised data from the Chinese authorities indicate that gross general government debt in that country was 34 percent of GDP at end-2010 - twice the level previously reported.
(Arun Kumar can be contacted at firstname.lastname@example.org)