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The global economic and financial outlook has improved in the last six months. Inflation has fallen, financial conditions have eased, and risks to the outlook are balanced. However, many countries continue to struggle with high public debt and fiscal deficits amid new challenges from high real interest rates and dimming medium-term growth prospects.
Our latest Fiscal Monitor calls for governments to avoid slippages and focus more on rebuilding buffers and safeguarding fiscal sustainability over the medium term.
Fiscal policy shifted to be more expansionary last year after a rapid improvement in debt and deficits in the prior two years. Only half of the world’s economies tightened fiscal policy last year, down from about 70 percent in 2022.
Four years after the start of the pandemic, public spending, excluding interest payments, remained about 3 percentage points of gross domestic product above prepandemic projections in advanced economies, excluding the United States, and 2 percentage points above them in emerging market economies, excluding China. This spending level reflects the slow unwinding of crisis-era fiscal policies and the introduction of new support measures, alongside new industrial policy measures including subsidies and tax incentives. Higher nominal interest rates pushed up interest payments in most economies.
Global public debt edged up to 93 percent of GDP in 2023 and remained 9 percentage points above the prepandemic level. The increase was led by the two largest economies, United States and China, where debt rose by over 2 and 6 percentage points of GDP respectively....
more at IMF