Evelyn Reynolds

Global public debt will exceed $100 trillion by the end of 2024, per the IMF.
The U.S.’ and China’s rising fiscal deficits account for a significant share of increasing debt levels.
Poor nations in sub-Saharan Africa are struggling the most to raise taxes while ensuring fiscal programs.

A man walks past signage for the the 2024 IMF/World Bank Annual Meetings outside of the headquarters of the International Monetary Fund in Washington, DC on October 18, 2024. 
Daniel Slim | AFP | Getty Images

The International Monetary Fund warned Wednesday that the public debt situation worldwide could be more dire than most think, highlighting skyrocketing fiscal deficits in the U.S. and China.
Global public debt will rise above $100 trillion by the end of 2024, the agency projected in its annual Fiscal Monitor report. By the end of the decade, the IMF forecasts global public debt will reach 100% of world GDP. 

The U.S. and China account for a significant share of rising public debt levels. If the two countries were excluded from calculations, the global public debt to GDP ratio would fall around 20%, the IMF said. 
“Public debt may be worse than it looks,” the IMF’s director of fiscal affairs, Vitor Gaspar, said, adding that governments’ debt calculations suffer from an optimism bias and are prone to underestimation. 
Governments are facing a “fiscal policy trilemma,” per the report. That is, they are caught between needing to spend more to ensure security and growth — and also facing resistance toward higher taxation while public debt levels become less sustainable, the report found. Poor countries in sub-Saharan Africa are most under pressure between the need to spend to alleviate poverty, while struggling with lower tax capabilities and worse finance conditions. 
Unsustainable debt levels place countries’ markets at risk of a sudden sell-off if investors view a country’s fiscal health as too poor. This uncertainty, even across advanced economies with higher debt tolerance such as the U.S. and China, can lead to a spillover effect of higher borrowing costs to other economies.
The U.S. Treasury Department announced earlier in October that the nation’s budget deficit has risen to $1.833 trillion, the highest level outside of the pandemic era. In recent years, the U.S. has approached several government shutdowns as government funding bills become more contentious between politicians amid growing concerns about the country’s fiscal health.
In the IMF’s China country report released in August, it underscored local government spending’s outsized role in the country’s high fiscal deficit. While it noted that local government spending actually fell in 2023, the effects were offset by lower revenues from extended tax relief.

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An escalation of trade and tariffs tensions between the U.S. and China would have economic consequences around the world, Gita Gopinath, deputy managing director of the International Monetary Fund said.
“Output is going to be much lower than what we are projecting for all countries in the world, there’s going to be pressure on inflation, so that’s not the direction in which we should be going,” she told CNBC.
China has also announced higher temporary tariffs on some imports from the U.S. as the tit-for-tat measures continue.

An escalation of trade and tariffs tensions between the U.S. and China would have “costly” economic consequences around the world, Gita Gopinath, deputy managing director of the International Monetary Fund told CNBC on Wednesday.
“We are seeing geopolitically driven trade around the world, which is why when you look at overall trade to GDP that’s holding up fine, but who’s trading with whom is certainly changing,” she said.

The U.S. and China are trading with one another less, and some parts of their trade is being re-routed through other countries, she added.
Trade tensions between the U.S. and China and the European Union and China have been mounting this year, with both the U.S. and EU implementing higher tariffs on some Chinese goods over what they claim are unfair trade practices from Beijing.
China has also announced higher temporary tariffs on some imports from the EU as the tit-for-tat measures continue.
If tariffs were escalated, modelling from the IMF suggests it would be “costly for everybody,” Gopinath told CNBC’s Karen Tso on the sidelines of the agency’s annual meeting in Washington.
“Output is going to be much lower than what we are projecting for all countries in the world, there’s going to be pressure on inflation, so that’s not the direction in which we should be going,” she explained.

Gopinath’s comments come after IMF Managing Director Kristalina Georgieva said last week that international trade would no longer be the “engine of growth” it once was, and that “retaliatory” trade measures could hurt those imposing them as much as their targets.
Tim Adams, CEO of the Institute of International Finance, also warned Wednesday that tariff proposals from U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates.
The IMF’s Gopinath said it would benefit both the U.S. and China to have “good working relations,” noting that this was also important for the rest of the world.
It is “in everyone’s self interest that these relationships are maintained,” she said.
The IMF warned in its recent World Economic Outlook report that increasing protectionist policies were a downside risk to growth.
“A broad-based retreat from a rules-based global trading system is prompting many countries to take unilateral actions. Not only would an intensification of protectionist policies exacerbate global trade tensions and disrupt global supply chains, but it could also weigh down medium-term growth prospects,” the report said.
— CNBC’s Jenni Reid contributed to this story More

Extreme tariffs proposed by U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates, according to the head of the Institute of International Finance.
Trump has made universal tariffs a core part of his economic pitch to voters, with suggestions of a 20% tariff on all goods from all countries and a higher 60% rate on Chinese imports.
Trump has previously described universal tariffs as drawing a “ring around the country,” and denied they would be inflationary.

Extreme tariffs proposed by U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates, according to the head of the Institute of International Finance.
“The assumption is you’ll have higher inflation, higher interest rates than you would have in the absence of those tariffs,” Tim Adams, president and CEO of the IIF financial services industry trade group, told CNBC’s Karen Tso on Tuesday.

“You can argue, is it one off, or is it over time? It really depends on what retaliation looks like, and is it iterative over time. But no doubt it would be a break on the progress we’re making bringing down prices,” Adams said.
Trump has made universal tariffs a core part of his economic pitch to voters, with suggestions of a 20% tariff on all goods from all countries and a higher 60% rate on Chinese imports. He has also pledged to put a 100% tariff on every car coming across the Mexican border, and to slap any country which acts to “leave the U.S. dollar” with a 100% tariff.

In defense of the plan, Trump told Bloomberg Editor in Chief John Micklethwait in an interview earlier this month: “The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn’t have to pay the tariff.”
Trump has previously described universal tariffs as drawing a “ring around the country,” and denied they would be inflationary.

However, analysts have warned that the overall package proposed by Trump, including higher tariffs and curbs on immigration, would place upward pressure on inflation, even if some of the impact could be absorbed in the near-term.
U.S. inflation came in at 2.4% in September, down from a peak of 9% in June 2022 as the world grappled with the impacts of pandemic supply chain disruption and vast fiscal stimulus. The Federal Reserve kicked off interest rate cuts in September with an aggressive half percentage point reduction, despite concerns about the onward path of disinflation.

The potential return of a Trump U.S. presidency comes at a time of increasing trade fragmentation around the world. The European Union earlier this month voted to place higher tariffs on China-made battery electric vehicles, alleging carmakers there benefit “heavily from unfair subsidies.”
The IIF’s Adams told CNBC that both Trump and his Democrat opponent Kamala Harris were running as “change candidates” rather than pledging continuity.
“The concern about Trump is that he’s anti-internationalist, doesn’t care about transatlantic relations, and will be more focused on isolationism and protectionism. Some of them may be a little overdone, but there’s certainly elements of that,” Adams said.
“There’s no doubt that Vice President Harris will be much more engaged with the global community, much more interested in international organizations.”
CNBC has contacted the Trump campaign for comment.
— CNBC’s Rebecca Picciotto contributed to this story. More

The Washington, D.C.-based organization highlighted that China’s property sector contracting by more than expected is one of many downside risks for the global economic outlook.
China last week reported third-quarter gross domestic product growth of 4.6%, slightly higher than the 4.5% that economists polled by Reuters had been expecting.
In a report published Tuesday, the IMF trimmed its forecast for growth in China for this year to 4.8%, 0.2 percentage points lower than in its July projection.

Chinese flags for sale on Nanjing East Road in Shanghai, China, on Wednesday, Oct. 2, 2024.
Qilai Shen | Bloomberg | Getty Images

The International Monetary Fund (IMF) warned of a possible worsening of the state of China’s property market as it trimmed its growth expectations for the world’s second-largest economy.
In a report published Tuesday, the IMF trimmed its forecast for growth in China for this year to 4.8%, 0.2 percentage points lower than in its July projection. In 2025, growth is expected to come in at 4.5%, according to the IMF.

The Washington, D.C.-based organization also highlighted that China’s property sector contracting by more than expected is one of many downside risks for the global economic outlook.
“Conditions for the real estate market could worsen, with further price corrections taking place amid a contraction in sales and investment,” the report said.
Historical property crises in other countries like Japan (in the 1990s) and the U.S. (in 2008) show that unless the crisis in China is addressed, prices could correct further, the IMF’s World Economic Outlook noted. This in turn could send consumer confidence lower and reduce household consumption and domestic demand, the agency explained.

China has announced the introduction of various measures aimed at boosting its fading economic growth in recent months. In September, the People’s Bank of China announced a slate of support such as reducing the amount of cash banks are required to have on hand.
Just a few days later, China’s top leaders said they were aiming to put a halt to the slump in the property sector, saying its decline needed to be stopped and a recovery needed to be encouraged. Major cities including Guangzhou and Shanghai also unveiled measures aiming to boost homebuyer sentiment.

China’s Minister of Finance then earlier this month hinted that the country had space to increase its debt and its deficit. Lan Fo’an signaled that more stimulus was on its way and policy changes around debt and the deficit could come soon. The Chinese housing ministry meanwhile announced that it was expanding its “whitelist” of real estate projects and speeding up bank lending for those unfinished developments.
Some measures from the Chinese authorities have already been included in the IMF’s latest projections, Pierre-Olivier Gourinchas, chief economist at the IMF told CNBC’S Karen Tso on Tuesday.
“They are certainly going in the right direction, not enough to move the needle from the 4.8% we’re projecting for this year and 4.5% for next year,” he said, noting that the more recent measures were still being assessed and have not been incorporated into the agency’s projections so far.

“They [the more recent support measures] could provide some upside risk in terms of output, but this is the context in which the third quarter of Chinese economic activity has disappointed on the downside, so we have this tension between, on the one hand, the economy is not doing as well, and then there is a need for support. Is there going to be enough support? We don’t know yet,” Gourinchas said.
China last week reported third-quarter gross domestic product growth of 4.6%, slightly higher than the 4.5% that economists polled by Reuters had been expecting.
In its report, the IMF also noted potential risks to the economic measures.
“Government stimulus to counter weakness in domestic demand would place further strain on public finances. Subsidies in certain sectors, if targeted to boost exports, could exacerbate trade tensions with China’s trading partners,” the agency said. More

The International Monetary Fund projects global headline inflation will fall to 3.5% year-over-year by the end of 2025 from 5.8% in 2024
Rising market volatility was among the risks the agency highlighted to global growth
A spike in commodity prices would especially hurt lower-income nations, the IMF added

A man walks past signage for the the 2024 IMF/World Bank Annual Meetings outside of the headquarters of the International Monetary Fund in Washington, DC on October 18, 2024. 
Daniel Slim | AFP | Getty Images

Much of the world has managed to successfully lower inflation and engineer an economic soft landing, avoiding recession, but faces rising geopolitical risks and weaker long-term growth prospects, according to the International Monetary Fund. 
Global headline inflation will fall to 3.5% on an annual basis by the end of 2025, from an average 5.8% in 2024, the agency said in its World Economic Outlook released on Tuesday. Inflation peaked at a year-over-year rate of 9.4% in the third quarter of 2022. The yearend 2025 rate is slightly below the average annual rise in prices in the two decades before the Covid-19 pandemic. 

“The global battle against inflation is almost won,” the IMF report trumpeted, even as it called for “a policy triple pivot” to address interest rates, government spending and reforms and investment to boost productivity.
“Despite the good news on inflation, downside risks are increasing and now dominate the outlook,” said IMF chief economist Pierre-Olivier Gourinchas. Now that inflation is headed in the right direction, global policymarkers face a new challenge stemming from the rate of growth in the world economy, the IMF warned.
The fund kept its global growth estimate at 3.2% for 2024 and 2025 — which it called “stable yet underwhelming.” The United States is now forecast to see faster growth, and strong expansions are also likely in emerging Asian economies as a result of robust artificial intelligence-related investments. But the IMF lowered its outlook for other advanced economies — notably the largest European nations — as well as several emerging markets, blaming intensifying global conflicts and ensuing risk to commodity prices. 
Vigilance needed in final stretch of disinflation 
The Washington-based IMF, with 190 member countries, said in its overview that responsive monetary policy was key to bringing down inflation while labor market conditions normalized and supply shocks unwound, all of which helped avoid a global recession. 
Central banks will need to remain vigilant in fully bringing down inflation, the report warned. It added that services inflation still remains nearly double pre-pandemic levels as wages in certain countries continue catching up to an increase in the cost of living, leading several emerging market economies such as Brazil and Mexico to see an uptick in inflationary pressures. 

“While inflation expectations have remained well anchored this time around, it may be harder next time, as workers and firms will be more vigilant in protecting their standards of living and profits going forward,” the report stated.
Lower-income countries, where food and energy costs account for a greater share of household expenses, are also more sensitive to spikes in commodity prices that could lead to higher inflation. Poorer countries are already under greater stress from sovereign debt repayments, which could further limit funding for public programs. 
Market volatility among key downside risks 
Heightened financial volatility is another threat to global growth, the IMF report said. Sudden market sell-offs, such as occurred in early August, were cited by the IMF as a key risk that clouds the economic outlook. Although markets have steadied since the brief August’s slump, fueled by an unwinding of the yen carry trade and weaker-than-expected U.S. labor market data, worries remain, according to the fund. 
“The return of financial market volatility over the summer has stirred old fears about hidden vulnerabilities. This has heightened anxiety over the appropriate monetary policy stance,” the report said. 
Further challenges to global financial markets could come in the final stretch of the fight against inflation. Market turbulence and contagion is a key risk if underlying inflation remains stubborn — a key risk to low-income countries that are already under stress from high sovereign debt and currency market volatility. 
Other downside risks include geopolitical concerns, notably the Middle East conflict and potential spikes in commodity prices. A potentially deeper Chinese property market contraction, interest rates remaining too high for too long and rising protectionism in global trade are other threats to prosperity, the IMF said.  
The outlook is murkier longer term. The IMF forecasts global growth will rise 3.1% annually at the end of the 2020s, the lowest level in decades. While China’s weaker outlook has weighed on medium-term projections, but so does a deteriorating outlook in Latin America and Europe. Structural headwinds such as low productivity and aging populations are also limiting growth prospects. 
“Projected slowdowns in the largest emerging market and developing economies imply a longer path to close the income gaps between poor and rich countries. Having growth stuck in low gear could also further exacerbate income inequality within economies,” the IMF warned. More