Economic Crisis Unleashes Deep Recession in Austria – Stabilization Expected at Year-End
According to the June 2009 economic outlook of the Oesterreichische Nationalbank (OeNB), the Austrian economy is projected to enter a deep recession in 2009 owing to the global slump in growth, with real GDP set to shrink by 4.2%. After further declining by a modest 0.4% in 2010, positive real annual GDP growth of 1.2% will reemerge only in 2011. Compared with the OeNB December 2008 economic outlook, growth expectations for 2009 and 2010 were downgraded by 3.9 and 1.2 percentage points respectively. This major revision reflects the steep slump in the demand for exports and investment – unparalleled in the post-war period. The current downturn is so pronounced that GDP levels seen in 2007 will not return until 2011. HICP inflation will ease from 3.2% in 2008 to a mere 0.4% in 2009 and rise modestly to 1.1% and 1.2% in 2010 and 2011 respectively.
The Effectiveness of Fiscal Stimulus Packages in Times of Crisis
This paper provides theoretical and empirical evidence on the effectiveness of discretionary fiscal policy in times of crisis. In “normal” times, a whole range of arguments speaks against the use of discretionary fiscal policy for stabilization purposes – yet amid the current sharp economic downturn, many of those arguments (such as implementation lags or low fiscal multipliers) have comparatively little weight. The OeNB estimates that the measures the Austrian government has adopted so far – an inflation package, two economic stimulus packages, personal income tax reform brought forward – will increase GDP by roughly ¾% and will provide for 12,000 additional jobs in 2009. The effects of those measures are expected to continue into 2010. However, as Austria’s debt ratio stands to increase substantially at the same time, the government would be well-advised to commit itself to cutting the deficit and debt ratios when the crisis is over.
Fiscal Transparency in EU Accession Countries Progress and Future Challenges
This paper discusses the findings of fiscal transparency reports on standards and codes (ROSCs) for most EU accession candidate countries. Emphasis is given to the need to establish effective and accountable medium-term budget frameworks to establish policy credibility and anchor adjustment programs to meet EU fiscal goals. Adoption of budgeting and accounting standards consistent with the IMF Government Finance Statistics Manual 2001 framework will also help link budget decisions to EU standards of fiscal reporting. More consistent and comprehensive coverage of off-budget activities is needed for assessing fiscal risk and sustainability. Finally, local government issues need to be addressed by many of these countries since EU fiscal goals are set with reference to general government. Progress in all of these areas can be monitored by keeping fiscal ROSC assessments up to date.