Key facts
- IMF calls for urgent fiscal consolidation in advanced economies.
- Public debt is projected to reach 100% of GDP.
- Net borrowing by advanced economies is forecast to reach 5.2% of GDP this year.
- US deficit is projected to hit 8.5% of GDP this year.
- IMF warns global economic resilience is reaching its limits.
- IMF suggests China should spend more, US save more, and Europe invest more.
The International Monetary Fund (IMF) has issued an urgent call for advanced economies to implement fiscal consolidation measures, including reducing government spending, cutting deficits, and lowering debt levels. The institution warned that delaying these actions will make the task more challenging in the future.
Rodrigo Valdes, head of the IMF's Fiscal Affairs department, emphasized that escalating sovereign bond yields and elevated global debt necessitate immediate action, with public debt projected to reach 100% of GDP. The IMF's latest World Economic Outlook indicates that primary deficits have remained high and are significantly larger than pre-pandemic levels in many nations.
According to the IMF's forecast, net borrowing by advanced economies is expected to reach 5.2% of gross domestic product this year, the highest since 2021. The US economy is projected to grow by 2.3% on an inflation-adjusted basis, with a deficit hitting 8.5% of GDP this year and remaining around 8% over the next five years.
IMF Managing Director Kristalina Georgieva echoed these concerns, calling for "urgent repairs" to fiscal balances as bond yields spike. She stated that while the global economy has shown resilience, it is reaching its limits due to frequent shocks and uncertainty. Georgieva suggested a need for enhanced revenues, rationalized spending, and improved public financial management, adding that China should spend more, the US should save more, and Europe should invest more.