Debt of rich countries remains at high levels

Noam Stiekema

The debt of rich countries has stabilized, but remains near historically high levels and can also increase due to uncertainly economic recovery, warns the International Monetary Fund (IMF) in its six-month report. “The budget efforts over the last five years stabilized the ratio of government debt to gross domestic product (GDP), although it remains at […]

IMF

IMFThe debt of rich countries has stabilized, but remains near historically high levels and can also increase due to uncertainly economic recovery, warns the International Monetary Fund (IMF) in its six-month report. “The budget efforts over the last five years stabilized the ratio of government debt to gross domestic product (GDP), although it remains at a high level”, says the fund in official report.

The average public debt of rich countries is expected to grow slightly (0.3 points) to reach 106.5 percent of GDP this year and then shrink in 2015 to 106%. The IMF noted that the pressure on public finances fell amid low interest rates in rich countries, but risks remain high due to historically high debt ratios and weak recovery, along with the future costs of pensions and salaries.

It is expected Japan again to remain at the forefront of debt from 245.1% of GDP in 2014, followed by Greece (174.2%) and Italy (136.7%). The burden of debt in rich countries can grow in developed countries in the event of continued low inflation permanently. The Fund emphasizes that after years of austerity, the population “is supersaturated” reforms and the need for prudent fiscal policies combine sustainability of public finances and growth.

In emerging market economies debt remains generally moderate, but below levels from before the financial crisis in 2008-2009. This year the debt/GDP ratio should reach only 49.7% in China, 60.5% in India and 15.7% in Russia, the report said. Imminent increase in interest rates in the world can complicate the situation in these countries and occur more difficult times.

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