IMF projects global public debt to reach nearly 100% of GDP by 2030

Investing.com -- The International Monetary Fund (IMF) warned Wednesday that new U.S. tariffs and slower global growth will push public debt above pandemic-era levels, nearing 100% of global GDP by the end of the decade. The IMF’s latest Fiscal Monitor predicts that global public debt will expand 2.8 percentage points to 95.1% of global GDP in 2025, and reach 99.6% by 2030.

In 2020, global public debt peaked at 98.9% of GDP due to heavy borrowing for COVID-19 relief and a shrinking output. The debt fell by 10 percentage points within two years, but has been gradually increasing since then. The IMF cited major tariff announcements by the U.S., countermeasures by other countries, and high levels of policy uncertainty as factors worsening the situation.

The report also noted that governments face more challenging trade-offs, with budgets strained by higher defense spending, increased social support demands, and rising debt service costs that could grow with inflationary pressures. It predicts that governments’ fiscal deficits will average 5.1% of GDP in 2025, up from 5.0% in 2024, 3.7% in 2022, and 9.5% in 2020.

The IMF based its budget outlook on a "reference forecast" for 2.8% global GDP growth this year, which includes tariff developments through April 4. The fiscal and economic outlooks could worsen if steeper tariffs from President Donald Trump and retaliatory measures are implemented.

Debt levels could rise above 117% by 2027 in a severely adverse scenario, "if revenues and economic output decline more significantly than current forecasts due to increased tariffs and weakened growth prospects." The IMF noted that this would represent the highest share of GDP since World War Two.

Much of the debt growth is concentrated in larger economies, according to Vitor Gaspar, IMF Fiscal Affairs Director. About one third of the IMF’s 191 member countries now have debt growing at rates faster than before the pandemic, but they constitute about 80% of global GDP.

The IMF predicts a slight improvement in U.S. annual budget deficits over the next two years, to 6.5% of GDP for 2025 and 5.5% for 2026, compared to 7.3% for 2024. This improvement is attributed to increased tariff collections and continued U.S. output growth. However, this forecast assumes that the Republican tax cuts passed in 2017 will expire at the end of the year as scheduled.

China’s fiscal deficits are expected to grow sharply in 2025, to 8.6% of GDP from 7.3% in 2024, and settle at 8.5% in 2026. The IMF cited economic stimulus spending as a reason for China’s 2025 growth forecast holding at 4%, partly offsetting a major output drag from tariffs.

The IMF reiterated its advice to countries to prioritize public debt reductions to help build fiscal buffers against future economic shocks, which will require a delicate policy balance. The organization suggested that countries with limited budget room should implement gradual and credible consolidation plans and allow automatic stabilizers, like unemployment benefits, to work effectively. It also advised that any new spending needs should be offset by spending cuts elsewhere or new revenues.

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