The economic costs of sovereign default, as estimated by scholars, are found to be less drastic than most believe possible. The political costs of default, on the other hand, are non-negligible.
The world is littered with financial crises, yet we seem surprised every time they occur. Against this backdrop, we take a closer look at the financial crises since 1800 to see whether we can draw some lessons for the future.
Long-standing concerns about the sustainability of US fiscal imbalances have finally led to the first ‘negative outlook’ for the AAA-rating of US sovereign debt by S&P.
After the dismal failures of the financial markets to correctly price sovereign risk before the crisis, one must be aware that they can still over-or underprice sovereign risk in some countries.
Cameroon performs well on almost all macroeconomic indicators: inflation is low, the fiscal and current accounts are almost in balance and debt levels are sustainable. Nonetheless, GDP growth is low at 2.8% (2010).
Serbia’s economy is still weak as it posts twin deficits. The balance of payments position is weak as the continuously large current account deficits require debt financing. Even so, Serbia’s external position has improved since the nadir during the global financial crisis in 2008.
Kazakhstan’s economy is recovering steadily and posted 7% growth in 2010. The main problems in the banking sector have been dealt with, but the sector remains a major weakness nonetheless.
Azerbaijan has been affected much less by the global financial crisis than some other CIS countries, as it entered the crisis without a large credit bubble or high private external indebtedness.
New Zealand prior to the crisis seems to have developed a social convention where the government does the saving, leaving spending to households and firms (making New Zealand the exact opposite of Japan in this regard).
Economic Report Dutch version
On Friday, 11 March, 2011, Japan was struck by a historically severe earthquake, a devastating tsunami, and a nuclear crisis that is yet unresolved.The impact on the lives of those affected is foremost in our minds, dwarfing the huge economic impact, the magnitude of which we attempt to estimate in this Special Report.
Economic Update Dutch version
As the export and the government sector step back gradually this year, all eyes are on the Belgian firms and households. Based on high producer confidence and a rising capacity utilisation rate, we expect businesses to increase their investments this year to expand production capacity.