2 46
40 72
76 46
64 60
63 82
76 81
82 84
10 5
39 39
27 26
29 30
49 46
43 42
45
20 40
60 80
100 120
140
20 08
20 09
20 10
20 11
20 12
20 13
20 14
20 15
20 16
20 17
20 18
20 19
20 20
High income Developing
PHASE 1: Fiscal
expansion PHASE 2:
Fiscal contraction
Shock 1 2010-11 Shock 2 2016-20
2.2 Results
2.2.1 The Two Phases: Fiscal Expansion 208-09 and Fiscal Consolidation 2010-20 Analysis of expenditure projections verifies two distinct phases of spending patterns since the onset of the
global economic crisis. In the first phase of the crisis, most governments introduced fiscal stimulus programmes and ramped up total spending. Overall, 137 countries roughly three-quarters of the sample
expanded spending during 2008 and 2009 by an average annual increase of 3.3 per cent of GDP, with only about 50 countries contracting public expenditure see Annex 1.
In 2010, however, governments started to scale back stimulus programs and reduce spending in a second phase of the crisis that is ongoing and expected to continue at least until 2020. As depicted in Figure 1,
the expenditure contraction phase of the crisis is characterized by two unique shocks, the first occurring in 2010 and 2011 and the second taking off in 2016.
Figure 1: Number of Countries Contracting Public Expenditure as a percentage of GDP, 2008-20
Source: Authors’ calculations based on the IMF’s World Economic Outlook April 2015
In terms of the first shock, the number of countries reducing their budgets as a per cent of GDP mushroomed between 2009 and 2010, impacting 113 countries by 2011 or about 60 per cent of the
sample. The average contraction size during this period amounted to 2.3 per cent of GDP, on average, confirming that the change in fiscal position in most countries was both sudden and severe.
The worldwide drive toward austerity then temporality waned beginning in 2012. During the four year period between 2012 and 2015, a number of countries eased policies to cut expenditures, which likely
reflects the realization that prolonged budget cuts were not supporting economic growth and also contributing to political and civil unrest. In all, about 86 countries or just slightly below 50 per cent of
the sample, on average, cut their budgets during this phase.
