The trajectory of the public debt of the States might return in 2028 to the levels observed during the pandemic if nothing is done.
By Le Figaro with AFP
Posted update
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After two years of decline, thanks in particular to the economic recovery and inflation, State public debts should progress globally in the medium term to return in 2028 to the levels observed during the pandemic if nothing is done, the IMF warned on Wednesday. This is at least the conclusion of the report on budgetary policies, the Fiscal Monitor, published by the International Monetary Fund (IMF).
«We have seen a marked adjustment in the debt ratio following the increase observed in 2020, thanks to the reopening of the economy and the strong recovery observed, but also thanks to inflation, because it was unexpected, which contributed by temporarily increasing tax revenue“, explained the director of the department of budgetary affairs of the Fund, Vitor Gaspar. “But we observe a stabilization in the fall in public deficits and even an inversion concerning debt, which starts to rise once more in 2023. The consequence is that the level of debt in 2028 should once once more approach 100% of GDP“, the level reached during the pandemic, he added.
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In question, an increase in the rate ofindebtedness of the majority of developed and emerging countries, with the notable exception of the euro zone. China and the United States are particularly concerned, their ratio of indebtedness compared to their GDP having to reach respectively, in 5 years, 100% and 135%, levels never observed until now for the two countries. For China, this will even represent a doubling of its pre-pandemic debt level, the IMF pointed out.
The first two economic powers will also represent the majority of the cumulative increase by 2028, the IMF stressing that once these two countries are not taken into account, the global debt ratio will on the contrary decrease. “In fact, more than 60% of countries will experience a reduction in their indebtedness over the next five years. In reality, the increase is concentrated in a handful of countries: China, Japan, Turkey, Brazil, South Africa, the United States and the United Kingdom. The situation is therefore very different from one country to another.“, underlined Mr. Gaspar.
Thus, in the case of the United States,we observe a fairly rapid and persistent increase in indebtedness. Certainly, they take advantage of the fact that Treasury bonds are seen as the safest assets on the financial market. But we believe that an adjustment of their fiscal policy is necessary“, detailed Vitor Gaspar. The world’s biggest power’s debt is currently the subject of a showdown in Congress as the country hit its $31.4 trillion ceiling in January and might risk default next summer if no deal is forthcoming. is found between Republicans and Democrats.