The moment in the world economy is a dangerous combination of high public debt and weak growth, so it is time to begin budgetary adjustment processes (aka austerity), recommends Fiscal Monitor, the document from the International Monetary Fund (IMF) presented this Wednesday in Washington DC by former minister Vítor Gaspar. The Portuguese has been responsible for the IMF’s budgetary affairs department since 2014 and is responsible for Fiscal Monitor.
However, this adjustment must be “friendly to people and the economy”, said Gaspar, who also recommended that “public investment be protected”.
The Fiscal Monitor was presented this Wednesday as part of the IMF general meeting that takes place until October 26th in the North American capital. The document is published twice a year, in April and October, and is a guide to analyzing the global debt situation and recommending fiscal policies.
Global public debt at 100 billion
Gaspar warned that global public debt is expected to reach a historic maximum of 100 trillion dollars (93 trillion euros) this year and that it is close to returning in 2030 to a level of 100% of World Product at which it was already in the year of the pandemic. . He highlighted that a third of the world’s economies, which represent 70% of global GDP, have already high debt levels and many of them are expected to worsen until 2029.
In five years, there will still be 12 economies with debt levels above 100% of GDP and nine of them will have increased the ratio. Those that see their debt worsening until 2029 include China, which sees its ratio soaring by 21 percentage points of GDP, France, which sees a worsening of 14 percentage points, and the United States, which increases its debt level by almost 11 points. percentages.
These three cases will form part of the group of economies with debt ratios above 100% of GDP in 2029. China will pass the 100% barrier in 2027 and reach 111.1% in 2029. The US will see the ratio rise from 121% in 2024 to 132% five years later. France will rise from 112.3% to 124.1% in the same period.
The highest debt level is that of Japan. which will be at 245% of GDP in 2029, but will have made a reduction of six percentage points compared to 2024. The second highest level on a global scale will be that of Singapore whose ratio will increase to 178.4% of GDP in 2029. Italy with 142.3% and Bahrain with 142.1% will come next in five years and are part of the group in which the index is on an upward trajectory.
The euro zone will have four economies – Belgium, France, Greece and Italy – with debt levels above 100% of GDP in five years.
High deficits in large economies
Fiscal Monitor also draws attention to the trajectory of budget deficits in some large economies. China will be champion with the deficit rising from 7.4% of GDP in 2024 to 8.2% in 2029. The negative balance will also rise in the case of Belgium, from 4.7% to 6.3% in the same period.
Despite revealing some budgetary consolidation, India’s deficit in 2029 will still be at 6.6% of GDP, that of the United States at 6% and that of France at 5.9%.
Vítor Gaspar de-dramatized the situation in China and the USA, saying that the two largest economies in the world have “a very large space” to catch up on their accounts.
