IS THE WORLD HEADED DOWNHILL?
There are many signs that the world may be headed for a new economic slump, or worse. Which countries are best positioned to weather such a downturn and which are not?
Countries that have been fiscally responsible in the recent past are for the most part in better fiscal shape than those that have not, because they have a larger safety cushion.
In the table below, I have ranked countries (the major economies, plus two good examples -- Chile and Switzerland) on three fiscal variables. The first one is the net of their growth rate and deficit for 2013 (i.e., growth rate minus deficit). For most of the major countries, their deficits were greater than their rate of economic growth, giving them a net negative number.
The other variables I listed are government spending as a percentage of gross domestic product (GDP), and government gross debt as a percentage of GDP. Lower levels of government spending are associated with higher rates of economic growth and vice versa.
So, which countries may make it, and which ones may not?
