IEP Amendment & Change in Placement
Macroeconomic Risks:
FAD’s Fiscal Stress Tests
Covid-19
OCTOBER 27, 2020
Camilo Gomez Osorio
Macro-fiscal Advisor
AFRITAC South
A differentiated economic impact across SS Africa
Sub-Saharan Africa: Real GDP growth, 2019 - 2020
Fiscal risks: COVID-19 pandemic
The COVID-19 pandemic is impacting the public finances through increased spending and reduced
revenue collection, and through contingent liabilities turning into actual liabilities.
Change in Government Debt and Overall
Fiscal Balance (% of GDP)
Source: IMF WEO 2020
Source: IMF WEO 2020
Projected real per capita GDP
5.4 percent loss in 2020
General macro-economic risks
Analysis and quantification
Historical evidence of economic shocks can be analyzed by comparing expectations with
outcomes.
Governments can assess their fiscal exposure to macroeconomic risks by means of:
•
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.
Macroeconomic
Shocks: What is a Fiscal Stress Test?
The stress test applies a large, correlated macroeconomic and asset price shock, combined
with a contingent liability realization, to assess what fiscal impact there might be during an
extreme macroeconomic event.
Three Elements to a stress test
•
Large macro-fiscal shock
•
Contingent Liability Shock
•
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Three summary outputs
•
Fiscal Solvency
•
Government liquidity needs
•
Financing burden
How does the COVID-19 pandemic affect the economy?
How
to model this?
Two supporting approaches
1.
Estimating
sectoral
impact
under
different
combinations
of
stringency
and
duration
2.
Estimating
the
production
function
for
longer-run
effects.
1
1
,
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0
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,
9
60
.
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-
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20
21
GDP at Constant
Prices
Tr
end
PF
Approach
20
22
20
23
Sector Approach
Once
we
have
the
GDP
framework,
we
can
link
the
fiscal
framework
with
the
GDP
components,
using
proxy
bases,
buoyancies,
and
effective
tax
rates.
IMF
| Fiscal
Affairs
7
The Structure of FAD’s Fiscal Stress Test Tool
GDP scenarios
Stringency vs Length lockdown
Net Lending or Borrowing Balance
& Debt
Steps in the FST Framework
Calibrating FAD’s COVID-19 F Tool
UK April GDP outturn
FAD model sector calibration
Fiscal Risk Capacity Development
•
IMF has a wide array of tools to meet existing and emerging needs
•
Fiscal Stress Test for Covid-19 for understanding impact on macro-fiscal
•
Fiscal risk assessment for broader diagnostic
•
Other tools available for more granular needs
•
IMF is providing flexible and remote CD on demand
•
To discuss or request CD:
•
Contact Camilo (
CGomezOsorio@imf.org
), Robert (
rclifton@imf.org
) or Sybi
(
Shida@imf.org
)
•
Email FAD’s CD on demand address: CDsupport-macrofisc@imf.org
The process of amending an Individualized Education Program (IEP) and understand the significant change in placement considerations. Learn when it is appropriate to amend an IEP, examples of non-significant changes, and the reevaluation required for significant changes. Discover how to identify a significant change in placement and examples of such changes. Delve into IEP procedures and definitions to ensure effective IEP modifications."
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Presentation Transcript
Macroeconomic Risks: FAD s Fiscal Stress Tests Covid-19 OCTOBER 27, 2020 Camilo Gomez Osorio Macro-fiscal Advisor AFRITAC South
A differentiated economic impact across SS Africa Sub-Saharan Africa: Real GDP growth, 2019 - 2020
Fiscal risks: COVID-19 pandemic The COVID-19 pandemic is impacting the public finances through increased spending and reduced revenue collection, and through contingent liabilities turning into actual liabilities. Change in Government Debt and Overall Fiscal Balance (% of GDP) Projected real per capita GDP 5.4 percent loss in 2020 Source: IMF WEO 2020 Source: IMF WEO 2020
General macro-economic risks Analysis and quantification Historical evidence of economic shocks can be analyzed by comparing expectations with outcomes. Governments can assess their fiscal exposure to macroeconomic risks by means of: Sensitivity analysis shows the impact of small changes in key macroeconomic variables, taken one at a time, on government revenues, expenditures or debt. For example, lower GDP growth or higher oil prices. Scenario analysis is the design of alternative combinations of macroeconomic variables to illustrate the fiscal impact of adverse developments in key macroeconomic parameters. For example, a low growth scenario including contingent liability realization. Stochastic analysis derives a probability distribution of future debt stocks based on stochastic simulations of key variables, explicitly capturing the volatility and co- movements of key macroeconomic. Stochastic analysis could be expanded to include endogenous fiscal responses by governments.
MacroeconomicShocks: What is a Fiscal Stress Test? The stress test applies a large, correlated macroeconomic and asset price shock, combined with a contingent liability realization, to assess what fiscal impact there might be during an extreme macroeconomic event. Three Elements to a stress test Large macro-fiscal shock Contingent Liability Shock Impact of the shocks to the government s balance sheet Three summary outputs Fiscal Solvency Government liquidity needs Financing burden
How does the COVID-19 pandemic affect the economy? Containment measures Supply Demand Factory and mine closures Copper demand and prices Quarantines Travel bans and restrictions Cutbacks in services Confidence Closure of public places Supply chain disruption Business and tourism travel
How to model this? Two supporting approaches 1. Estimatingsectoral impactunder differentcombinationsof stringency and duration 2. Estimatingthe production function for longer-run effects. GDP at Constant Prices 11,960.0 9,960.0 7,960.0 5,960.0 3,960.0 1,960.0 -40.0 2018 2019 2020 2021 2022 2023 Sector Approach Trend PF Approach Once we have the GDP framework, we can link the fiscal framework with the GDP components, using proxy bases,buoyancies,and effectivetax rates. 7 IMF | Fiscal Affairs
The Structure of FADs Fiscal Stress Test Tool GDP scenarios Stringency vs Length lockdown Revenue implications (Effective Tax Rates) Expenditure implications (Links with Health) Net Lending or Borrowing Balance & Debt This approach allows quick demonstrations of different scenarios and requires only modest customization. However, the tool is unlikely to be integrated into macro-fiscal forecasting processes.
Steps in the FST Framework Stringency and Length GDP Revenue Expenditure Debt
Calibrating FADs COVID-19 F Tool FAD model sector calibration UK April GDP outturn Marginally affected (>90% operating capacity) Moderate decline (70-90% operating capacity) Large decline (50- 70% operating capacity) Severe decline (<50% operating capacity) 0% Fishing and fish processing on board Com, social and personal service activities Hotels and restaurants -5% Health -6% -10% Private -15% Real estate and business services Financial intermediation household with employed persons Education -20% Model FAD -19% -20% -20% -25% Public Wholesale and retail trade, repairs -24% Transport, and communication Mining and quarrying administration and defence -30% -35% Agriculture and forestry Electricity and water Construction Manufacturing -40% -40% -45% Public sector Agriculture Services Industry
Fiscal Risk Capacity Development IMF has a wide array of tools to meet existing and emerging needs Fiscal Stress Test for Covid-19 for understanding impact on macro-fiscal Fiscal risk assessment for broader diagnostic Other tools available for more granular needs IMF is providing flexible and remote CD on demand To discuss or request CD: Contact Camilo (CGomezOsorio@imf.org), Robert (rclifton@imf.org) or Sybi (Shida@imf.org) Email FAD s CD on demand address: CDsupport-macrofisc@imf.org
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