Read: https://www.imf.org/en/Publications/FM/Issues/2024/04/17/fiscal-monitor-april-2024
I have never heard of the term "fiscal slippage" until today. It seems to be a euphemism for "excess spending". Maybe if we see it in a sentence it will make more sense.
Furthermore, the risks of fiscal slippages are
particularly pronounced this time around.
Empirical evidence points to a bias toward
fiscal slippages in elections years.
The risks of fiscal slippages
are particularly acute given that 2024 is what is being
called the “Great Election Year”: 88 economies or
economic areas representing more than half of the
world’s population and GDP have already held or will
hold elections during the year. Support for increased
government spending has grown across the political spectrum over the past several decades, making this
year especially challenging, as empirical evidence shows
that fiscal policy tends to be looser, and slippages
larger, during election years.
Election years are often associated with fiscal
slippage, and this risk is further amplified by the current
context of increased demand for social spending.
In 2023, the United States experienced remarkably
large fiscal slippages, with the general government
fiscal deficit rising to 8.8 percent of GDP from
4.1 percent of GDP in 2022, despite strong growth.
Empirical evidence shows that fiscal policy tends to
be looser, and slippages larger, during election years,
reflecting a “political budget cycle.”
The analysis further
shows that realized deficits are higher than their
year-ahead projections by 0.4 percentage point of
GDP , indicating
a considerable risk of slippages to the modest fiscal
tightening projected for most economies in 2024. Such
fiscal slippages could potentially add to inflationary
pressures, especially in overheated economies.
Although gradual fiscal tightening is projected
to resume in 2024, the risks of fiscal slippages are
particularly acute during this “Great Election Year”
when numerous elections will be held in countries
across the world.
Fiscal slippage. A situation where a government’s
actual fiscal performance deviates from its planned or
targeted fiscal targets, usually resulting in higher-than-expected budget deficits, increased public debt, or a
combination of both.
I think the IMF needs to learn about the Magical Money Tree, and stop worrying. Fiscal slippages are not a problem because money appears like magic to pay for them!