IMF: Government Fiscal Package Goes Too Far?

IMF: Government Fiscal Package Goes Too Far?

 

The fiscal package proposed by the Slovenian authorities goes beyond the appropriate gradual approach and will impose a substantial drag on already-weak economic activity, International Monetary Fund (IMF) Mission Chief for Slovenia, Antonio Spilimbergo, has told the STA, commenting on the government’s reform programme.

According to Spilimbergo, “Slovenia needs to undertake additional fiscal adjustment over the medium term point to contain rising public debt and contingent liabilities and to calm unsettled financial markets.”

In view of Slovenia’s large output gap, IMF staff have noted in the past that a gradual approach would be appropriate, for example, adjustment of about 1 percent of GDP in structural terms annually, and full operation of automatic stabilizers should be allowed.