Why Fiscal Policy Is Unlikely to Come to the Market's Rescue Anytime Soon
A motorcyclist travels under a monorail bridge near a construction site in the Mid Valley area of Kuala Lumpur, Malaysia.
Photographer: Sanjit Das/BloombergThe growing chorus of investors yearning for fiscal stimulus to keep financial markets afloat next year should brace for disappointment.
The International Monetary Fund yesterday forecast budget balances will tighten modestly in both advanced and emerging markets next year by a sliver: a tenth of a percentage point, respectively.
Economists at Morgan Stanley, meanwhile, estimate that developed countries will ease fiscal policy next year but only to a modest degree at 0.3 percent of GDP — equating to a mild $115 billion increase in spending.
In both the IMF and Morgan Stanley's projections, the upshot for markets is the same: the fiscal stance around the world next year is forecast to remain effectively flat.