NEW YORK – Over the last two years, the majority of countries in the world chose to expand public spending in order to buffer the impact of the global financial crisis on their economies and populations. But, this year, with signs of economic recovery emerging, advanced countries have quickly shifted from fiscal stimulus to fiscal consolidation.
Now developing countries are also following the trend to consolidate. A recent UNICEF survey of 126 countries shows that a significant number of low- and middle-income countries are expected to reduce public expenditures in 2010-2011.
This comes at a bad time, just after world governments committed themselves to achieving the development goals, such as reducing poverty and infant mortality, agreed last September at the United Nations’ Millennium Summit.
For most low- and middle-income countries, the incipient economic recovery appears to be fragile and uneven. Indeed, many of these countries remain vulnerable to volatile commodity prices, financial-system weaknesses, depressed demand from world markets, and shortfalls in external finance, overseas development assistance, and investment.