They don’t let go of the debt of universal happiness – Newspaper Kommersant No. 190 (7391) of 10/13/2022

The volume of global public debt by the end of 2022 will grow to 91% of global GDP, which is 7.5 percentage points higher than the pre-pandemic level, according to the report of the International Monetary Fund (IMF). According to the fund’s calculations, the total public debt of developed countries will decrease to 112.4% of their GDP by the end of the year (against 117.9% last year, 123.2% in 2020 and 103.9% in 2019), in the coming years it will return to growth, but at a lower rate than during the pandemic. At the same time, the size of the total budget deficit is expected to decrease to 3.6% from 7.2% (in 2020 – 10.4%, in 2019 – 2.9%). In the United States, the debt burden this year will decrease from 128.1% to 122.1% of GDP (by 2027, on the contrary, it is expected to grow to 134.9%), in the euro area – from 93% to 91.3% of GDP with further reduction to 87.8% by 2027, including in Germany, the figure will decrease from 71.1% to 59.7%.

In developing countries, the average level of debt burden this year will increase to 65.1% (64.4% in the past, in 2019 – 54.5%, in 2020 – 64.7% of GDP), and by 2027 the figure could rise to 78.5%. The average budget deficit in developing countries will rise this year to 6.2% (from 5.3% last year). In China, against the backdrop of continued covid restrictions and slowing growth, the load will increase to 76.9% this year (from 71.5% a year earlier), in five years the fund expects it to grow to 102.8%. In Russia, the level of public debt will be even lower than last year (16.2% of GDP against 17%), while a budget deficit of 2.3% of GDP is expected against a surplus of 0.8% a year earlier.

The main obstacle to debt reduction was the rising price level – only the UN food price index rose by 45% since 2019 (this year, according to the forecast of the fund, global inflation will reach 8.8%), which required the allocation of new subsidies, tax cuts and other household support measures. In most countries, the amount of such support exceeds 0.5% of GDP. At the same time, governments are limited in their ability to increase it due to higher borrowing costs and the risks of inflation acceleration (which will also require a more significant tightening of policy from monetary regulators – such a discrepancy is extremely negatively assessed by markets, as in the case of the new fiscal plan published in the UK ), so countries will be forced to reduce the size of the budget deficit, the IMF believes.

Tatyana Edovina