Introduction
The International Monetary Fund (IMF) has warned that rising economic pressures from US tariffs will push global public debt beyond pandemic levels, reaching nearly 100% of global GDP by the end of the decade. This development stems from slowing growth and trade, which will strain public budgets.
Key Predictions
- Debt-to-GDP Ratio: The IMF’s Fiscal Monitor report predicts that global public debt will rise by 2.8 percentage points, reaching 95.1% of global GDP in 2025 and is expected to continue increasing, hitting 99.6% by 2030.
- Post-Pandemic Decline: Global public debt peaked at 98.9% of global GDP in 2020 due to pandemic-related borrowing. However, it has since risen and is now accelerating.
- Fiscal Deficits: Annual fiscal deficits of governments are projected to average 5.1% of global GDP in 2025, up from 5.0% in 2024, 3.7% in 2022, and a high of 9.5% in 2020.
Impact of Tariffs and Trade Uncertainty
The IMF attributes the worsening outlook to significant US tariff announcements, retaliatory measures from other countries, and exceptionally high political uncertainty. These factors strain government budgets due to increased spending on defense, social support demands, and rising debt servicing costs, potentially exacerbated by inflationary pressures.
Regional Implications
According to Vitor Gaspar, Director of Fiscal Affairs at the IMF, a significant portion of the debt growth is concentrated in larger economies. Around one-third of the 191 IMF member countries now have debt growing faster than pre-pandemic levels, accounting for roughly 80% of global GDP.
- Social Spending Demands: Increasing debt pressures could lead to higher demands for social spending, particularly in vulnerable countries facing severe trade disruptions.
- <Development Assistance Reduction: The reduction of development assistance from the US and other wealthy nations, continuing a recent trend, will further complicate fiscal situations for these countries.
US and Chinese Fiscal Outlooks
The IMF anticipates a slight improvement in US annual fiscal deficits over the next two years, reaching 6.5% of global GDP by 2025 and 5.5% by 2026, down from 7.3% in 2024. This is attributed to higher tariff-based revenues and continued US economic growth.
In contrast, China’s fiscal deficits are expected to grow sharply in 2025, reaching 8.6% of global GDP from 7.3% in 2024, and stabilizing at 8.5% in 2026. The IMF cites economic stimulus spending as a key factor maintaining China’s projected 4% growth rate for 2025, partially offsetting production losses due to tariffs.
