The International Monetary Fund is warning in its latest World Economic Outlook that global economic resilience is under strain and that leading economies need to take “urgent” action to shore up public finances and put debt levels on more sustainable paths.
“The global economy is again proving resilient, but unevenly so and with rapidly narrowing margins of adjustment in the near term,” the IMF says in its new report. It adds: “Given elevated debt, rising sovereign yields, and pressing spending needs, a renewed focus on rebuilding fiscal space is increasingly urgent. Governments should implement credible fiscal adjustment plans that combine enhancements on the revenue side with spending rationalization, supported by institutional improvements.”
The group’s latest forecast notes that “primary deficits have remained elevated and are significantly larger than before the pandemic in many countries.”
The IMF predicted that net borrowing by advanced economies this year would reach 5.2% of gross domestic product, its highest level since 2021, during the Covid-19 pandemic. It sees the United States economy growing by 2.3% on an inflation-adjusted basis, with a deficit that hits 8.5% of GDP this year and stays around 8% of GDP over the next five years.
