Global debt is at historic high: IMF
WASHINGTON, April 19, (Agencies): Global debt is at a historic with a record peak of $164 trillion recorded in 2016, that is equivalent to 225 percent of global GDP, the International Monetary Fund (IMF) said Wednesday in its April Fiscal Monitor.
“The world is now 12 percent of GDP deeper in debt than the previous peak in 2009, with China as a driving force,” it said.
Public debt and government deficits were listed as major contributors to the surge in global debt.
In advanced economies, debt is at 105 percent of GDP on average. In middle-income economies, it is close to 50 percent of GDP on average.
Meanwhile, the US tax cuts approved at the end of 2016 will push US deficit spending to $1 trillion or five percent GDP, over the next three years. The US debt will increase to nearly 117 percent by 2023, it said.
Advanced
Other than the US, all other advanced economies are expected to see their debt to GDP levels decline moderately over the next five years, it said.
For the US, where fiscal stimulus is happening, policy should be recalibrated to ensure that the government debt-to-GDP ratio declines over the medium term.
“Decisive action is needed now to strengthen fiscal buffers, taking full advantage of the cyclical upswing in economic activity,” the report said.
“As growth returns to its potential, fiscal stimulus loses its effectiveness while the cost of fiscal consolidation diminishes, making it easier to switch from fiscal expansion to fiscal consolidation.”
Governments must take care, even when there are disagreements, to avoid harming trade and investment which have been key drivers of the global economic recovery, IMF chief Christine Lagarde said Thursday.
Amid concerns that escalating trade tensions between the United States and China could reverberate through the world economy, Lagarde urged the sides to resolve their disputes through dialogue.
“Investment and trade are two key engines that are finally picking up. We don’t want to damage that,” she said at a press briefing to open the spring meetings of the International Monetary Fund and World Bank.