Despite forecasts that debt will stabilize or decrease in about two-thirds of countries, it will remain significantly higher than pre-pandemic levels, according to International Monetary Fund.
This year, state debt will amount to 93% of global GDP, and is expected to approach 100% by 2030.
Report notes that “at-risk” debt in economically developed countries has decreased slightly over past three years, making up 134% of GDP. In contrast, debt in countries with emerging markets and developing countries has increased to 88% of GDP.
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“The differences within and between country groups are associated with initially higher debt levels in countries with developed economies and significant primary deficits in systemically important countries such as China and US,” report explains.
In an extremely unfavorable scenario, global debt is expected to exceed baseline forecast by almost 20 percentage points of GDP over next three years, reaching 115% of GDP.
“This is because current high debt level amplifies consequences of weakening economic growth or tightening financial conditions, as well as the increasing differential between interest rates and future debt levels,” document notes.
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IMF warns that debt level may be higher than forecast, partly due to so-called “hidden” debt, which includes changes in debt not related to differences in interest rates, growth rates, budget deficits, or currency fluctuations.
IMF has cautioned that countries, particularly Brazil, Italy, France, UK, US, and South Africa, need to reduce their debt levels. The report states that now is most opportune time to do so, as inflation is decreasing and central banks are preparing to ease their policies.
