IMF warns of Fiscal Slippages

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!