Mr. Chairman, Governors, honored guests, it is a pleasure to welcome you to these meetings on behalf of the International Monetary Fund. I would like to extend a special welcome to my new colleague Paul Wolfowitz. Paul’s qualifications are strong. His distinguished career as a diplomat and public servant were very well known. What was less well known in some circles when he took office was his deep commitment to development, which was again so evident in his excellent speech today. Welcome, Paul.
Notwithstanding the deceleration in global activity in late 2011 and weaker growth prospects (see the April 2012 World Economic Outlook), fiscal deficits in most advanced economies are projected to continue to decline in 2012 (Table 1). Headline deficits will fall by almost 1 percentage point of GDP among the advanced economies, as countries unwind fiscal stimulus and, in a few cases, implement austerity measures in response to market pressures. At about 1 percentage point of GDP, deficit reduction in cyclically adjusted terms would be slightly higher than that implemented in 2011. In many cases, the challenge will be to ensure continued progress toward sound public finances while avoiding an excessive fiscal drag on activity. Gross financing needs are expected to decline only slightly, hovering around 25 percent of GDP per year over the coming three years in advanced economies, as lower deficits are offset by higher rollover requirements on a larger maturing debt stock (Table 2).