The International Monetary Fund (IMF) has warned that the ongoing uncertainty in the global economy could drive public debt levels back to their highest point since World War II, with the eurozone expected to be hit hardest.
The IMF’s latest half-yearly Fiscal Monitor, released Wednesday, predicts that global public debt will rise by 2.8 percentage points in 2025, reaching approximately 95% of global GDP, and could approach 100% by the end of the decade.
The IMF’s projections for major economies such as France and Germany are particularly concerning. In France, the IMF forecasts that the annual deficit, currently at 5.5% of GDP in 2025, will increase to 6.1% by 2030, with total public debt reaching 128.4% of GDP. This comes despite Prime Minister François Bayrou’s pledge to reduce the deficit to 3% by 2029, in line with EU fiscal rules.
Germany’s fiscal outlook is slightly less dire, as its starting position is more favorable. The IMF estimates that Germany’s debt will remain below 75% of GDP by 2030. However, the IMF still expects the country’s budget deficit to grow from 3% to over 4% of GDP by 2030, driven by increased spending on infrastructure and military projects. Before the pandemic, Germany consistently maintained a balanced or surplus budget.
The IMF also expressed skepticism about the U.S. reaching its target of reducing the deficit to 3% of GDP by the end of the decade. Instead, it predicts the U.S. will continue running a deficit of more than 5.5% of GDP.
The report underscores the impact of global geopolitical tensions, which the IMF has repeatedly warned are undermining free trade and cooperation. The Fund highlights the risk that increased financial instability in major economies, particularly the U.S., could lead to higher financing costs for emerging markets and developing economies.
The IMF’s outlook suggests that global debt could rise by as much as 4.5% of GDP in the medium term due to heightened uncertainty. In a more negative scenario, it warns that global debt could reach 117% of GDP by 2027, a level not seen since World War II.
However, the IMF offered a more positive outlook for the U.K., implicitly endorsing Chancellor Rachel Reeves’ efforts to stabilize public finances. The Fund forecasts that the U.K.’s budget deficit will narrow to 2.3% of GDP by 2030, down from 5.7% in 2024.
