Fiscal Stimulus is still Needed for Global Recovery

Responding to the economic and financial crisis, a large number of countries introduced fiscal stimulus packages to support aggregate demand. These have been critical in avoiding the recession becoming a depression. The fiscal stimulus is also upholding the recovery in most economies. Now, many Governments find time has come to withdraw from the stimulus. At the recent G20 gatherings in Busan and Toronto, most Governments indicated fiscal consolidation should be the priority now. Fears for financial market nervousness over rising public debts had overtaken concerns for persistent high unemployment and weak private sector demand. The first priority, as the Secretary-General stressed at the Toronto G20 summit of June 2010, should therefore be to overcome the global jobs crisis through refocused stimulus measures. Doing so will strengthen the recovery and with it the need for fiscal stimulus will dissipate as tax revenues rise and private demand picks up.