The IMF estimates that “government debt for advanced G-20 countries [will] reach 118 per cent of GDP on average by 2014”, compared with a pre-crisis level of about 78 per cent. 4 For 2010, the combined fiscal deficits of these countries is estimated at nearly 9 per cent of GDP.
One important factor will be clear guidance from governments about the means and the timing of fiscal consolidation. Given the size of the deficits, tough choices will need to be made. Clear communication in this regard can help to manage market expectations and reduce uncertainty. The third area of public policy concerns the openness of markets.