News
Fiscal Policy · Global Debt · IMF · US Economy
The International Monetary Fund (IMF) reports global government debt will match annual economic output by 2029, a year earlier than previously forecast, primarily driven by the United States and China.
The IMF's twice-yearly report indicates this level of debt has only been seen after World War II. Adverse circumstances, like a prolonged Middle East conflict, push global debt to 117% of GDP by 2029, or 121% if the war persists, due to higher food and fuel prices, tighter financial conditions, lower activity, and increased defense spending.
The U.S. government's gross debt reaches 135.5% of annual economic output in 2029, up from 123.9% last year, with annual deficits expected to remain between 7% and 8% of GDP, an unprecedented peacetime level. The IMF states tax rises, removal of tax breaks, and spending cuts are necessary for the U.S., specifically addressing Social Security and Medicare pressures.
Interest payments on U.S. debt approach 5% of GDP by 2030, up from 4.3% last year, assuming unchanged long-term interest rates. China's accumulated government borrowings hit 120.3% of GDP in 2029, an increase from 99.2% last year, with the IMF recommending scaling back poorly targeted industrial policies.
In contrast, advanced economies excluding the U.S. see a slight debt reduction, with the U.K., Canada, and Japan showing progress through tax increases or spending restraint. Eurozone governments face rising debts to 89% of GDP by 2029, requiring difficult choices amid increased defense spending and demographic pressures.
Developing economies, excluding China, also face rising debts, particularly vulnerable to a prolonged Middle East conflict.
