The fight against covid and anti-inflation policies have put the finances of most of the world on the ropes, which will return to normal at a still slow pace. He International Monetary Fund (IMF) foresees the fiscal deficits global costs will still rise slightly in 2023, to an average of 5% of GDP, as governments face interest expense higher and pressures to increase their public policies, especially the items of salaries and pensionsto catch up with inflation pass, as is happening in Spain.
In updating your report ‘Fiscal monitor’ published this Wednesday by the IMF, in the framework of its spring meeting, the multilateral organization also points out that the levels of public debt in the world will remain high. Following the historic rise in global public debt to almost 100% of GDP In 2020, due to the effect of the policies against the covid, the level has dropped decisively to around 92% in 2020. However, the fund foresees a worsening in the coming years that will once again bring the world public debt rate to around 100% (99.6%) in 2028, driven by the interest payment.
In its report, the IMF warns that United States, China The US and other major economies must do more to address debt levels that will rise to near-record levels in five years, warning that this will limit nations’ ability to respond to future crises. “In the future, public debt will not only exceed the level projected before the pandemic, but will also increase faster than what was projected before the pandemic,” said the director of the IMF’s Fiscal Affairs Department, Victor Gaspar.
The ‘Fiscal Monitor’ points to USA and China, the world’s two largest economies, as responsible for almost all of the forecast increase in debt. The US debt-to-GDP ratio is projected to rise from 121.7% in 2022 to 136.2% in 2028. US debt is estimated to China it will rise to 104.9% of GDP in the next five years from 77.1% in 2022 as spending increases and the economy expands less than was projected before the pandemic. For the Euro zoneHowever, a reduction in the weight of public debt over GDP is expected from 90.9% in 2022 to 85.4% in 2028.
Spain, around 110%
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In particular, for Spainthe IMF forecasts that the public debt rate, which reached 120.4% of GDP in 2020, and fell to 112% in 2022, will still remain at a high level of 109.3% in 2028.
The problem with such high levels of public debt is that the interest charge it ends up stifling the states’ room for manoeuvre. In the case of Spain, the IMF forecasts that the public deficit will remain at 4.5% of GDP in 2023, and although a valley of 3.5% is anticipated for 2024, it is projected that the rate will settle in 4 % in the years 2026, 2027 and 2028. If it were not for the interest burden on the public debt, the primary deficit of those three years it would not be 4%, but 1.5%.