Question

how successful the two countries ( Netherlands and Malaysia ) used fiscal policy to pursue objectives of sound macroeconomic management post Global Financial Crisis until the end of 2018 ?

Answer 1

Developing countries have been affected by the financial and economic crisis, although the impact has been somewhat delayed. Each country has different challenges. The closer developing countries are to interconnection with the world economy, the more severe the effect. And the nascent recovery which is becoming evident, for the moment, is limited to a few countries and regions. This crisis was mainly transmitted by trade and financial flows which forced millions of people to return to poverty. The achievement of the Millennium Development Goals is under serious threat in many countries. Many developing countries do not have and do not have the resources to stimulate the economy and protect their socially disadvantaged populations, such as the industrialized countries. However, many countries have made great efforts to reduce their impact.

As a result of the global financial crisis, the level of potential production in many affected countries has declined considerably; and the decline in growth rates continues. Restoring strong growth is essential to overcome future challenges and will require the effective use of all the fiscal tools available to decision-makers. There are ways to achieve macroeconomic stability after the global financial crisis until the end of 2018,

1. Increasing potential output is a priority in the main developed and developing market economies.

2. The first part of this note explores the stages of fiscal policy that can stimulate growth in the medium and long term; and how big the impact is. 1

3. It has been found that the growth dividend from tax reform can be very large. For example, in a series of country studies, per capita growth in developed countries is estimated to be around 1 percentage point higher after-tax reform, on average

4. Careful design and social consensus are important for the success and resilience of the reform. To reap the full benefits of growth, fiscal reform must be internally consistent and complemented by relevant structural reforms (for example, labour or trade) and supportive macroeconomic policies. It is very important to balance the objectives of efficiency and equality and to foster public support through social dialogue. Although individual policies may be regressive, the reform package and its impact on equality must be fully analysed

5. For countries with no fiscal space, the second part of this note illustrates how to create fiscal space while minimizing the negative effects on growth and equity. Specifically, this provides a high-level framework developed by the OECD for making policy decisions on fiscal and spending instruments to create fiscal space. Many developed G-20 countries have a Significant room for manoeuvre to meet budgetary challenges with side effects is limited to growth and equity if the instrument is well chosen. Although the choice of instruments depends on the weights associated with short-term versus long-term equity considerations, the relatively favourable instruments that have emerged include subsidies and pension and property tax reforms.

For countries that cannot (or do not need) to expand fiscal space, growth prospects can be improved through neutral fiscal reforms. Developing countries have also increased cooperation among themselves and have urgently demanded a greater voice in global economic affairs. The industrial countries are mainly concerned with their own problems. Their willingness to provide wider assistance is limited. They are under pressure from international institutions to ease their previous domination over the developing countries that are strengthening. The change in power and influence observed before the financial crisis increased.