The world's public debt will exceed 100 percent. GDP. “Highest level since 1948”

Forecasts indicate that public debts of countries will exceed 100 percent by 2029. GDP around the world, which would be the highest level since 1948, and will continue to grow, the International Monetary Fund warned on Wednesday, calling on countries to create buffers against risk factors.

Vitor Gaspar, head of the IMF's fiscal affairs department, told the organization's annual meeting in Washington that in an “unfavorable but credible scenario” the global level of public debt could rise to 123% of GDP by the end of the decade, slightly below the historical record of 132%. GDP that was recorded just after World War II.

In its Fiscal Monitor, the IMF explained that accumulated public debt increased faster than expected before the COVID-19 pandemic because, during the pandemic, governments launched budget-costly aid programs for citizens and businesses. The fund called on governments to shift spending to growth-friendly areas such as infrastructure and education to help strengthen the global economy and make debt more sustainable.

The report noted that in a number of the world's largest economies, the public debt to GDP ratio has either already exceeded 100% or will do so in the coming years. This group includes six of the seven G7 countries – the USA, Canada, Japan, Great Britain, France and Italy, as well as, among others, China.

The IMF noted that in many countries there is still pressure to increase spending while being reluctant to raise taxes. “Imminent spending on defense, natural disasters, disruptive technologies, demography and development are increasing pressure on public spending. All these pressures and demands combine with sharp political constraints on tax increases and reduced public awareness of fiscal constraints,” the report said.

The IMF stressed that emerging economies in particular may have difficulty managing their debt – even with much lower debt-to-GDP ratios than developed countries. “Many emerging markets and low-income countries face tougher fiscal challenges despite relatively low debt levels,” the report said. The IMF added that as many as 55 countries are struggling with debt problems or are exposed to high debt risk, even though their debt-to-GDP ratio is below 60%. (PAP)

bjn/mal/