The International Monetary Fund (IMF) has raised alarm over global public debt, projected to reach its highest level since 1948 – 100% of GDP – by 2029, driven by the United States, China and the European Union.
In the case of the US, the IMF noted that while there is still some “fiscal space,” reversing the debt trajectory is crucial to prepare for future crises, according to Era Dabla-Norris, Deputy Director of the IMF’s Fiscal Affairs Department.
The US Treasury expects federal debt to hit 125% of GDP by the end of 2023, signalling mounting pressure on the world’s largest economy.
In China, public debt is nearing 100% of GDP but is primarily concentrated at the local government level, with the central government still retaining significant borrowing capacity.
The IMF emphasised the importance of stronger economic support to counter China’s slowing growth and to mitigate potential deflationary risks.
In Europe, boosting growth and productivity is “absolutely essential” to close the gap with the US, Dabla-Norris stated.
According to the Fiscal Monitor, redirecting 1% of GDP from public spending towards investments could increase economic growth by 1.5% over five to ten years in advanced economies, including the EU.
