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The COVID-19 crisis and its implications for fiscal policies

The COVID-19 crisis and its implications for fiscal policies

While eleven countries recorded budgetary surpluses in 2019, all euro area countries are expected to record budget deficits in excess of the 3% of GDP reference value this year. The largest deficits are forecast for Belgium, Spain, France and Italy, which were among those countries that entered the crisis with high government debt-to-GDP ratios (see Charts A and B). The euro area aggregate debt-to-GDP ratio is expected to rise steeply, by 16.7 percentage points, to 102.7% of GDP in 2020, with large heterogeneity across countries. Countries that entered the crisis with debt ratios of around 100% will experience the strongest increases in indebtedness. Only six euro area countries (Estonia, Luxembourg, Latvia, Lithuania, Malta and Slovakia) are expected to maintain debt ratios below the 60% of GDP reference value in 2020. In 2021, under unchanged policies, government deficit and debt-to-GDP ratios are expected to decline, albeit remaining far above pre-crisis levels.