As election years approach, governments around the world are facing increasing pressure to boost public spending in order to win over voters. This trend is particularly pronounced in 2024, where a record number of countries are holding elections, prompting concerns from the International Monetary Fund (IMF) about rising deficits and debts.
The IMF is urging governments to exercise fiscal moderation and consider taxing excessive company profits in order to address spending on healthcare and pensions. The organization is particularly worried about the impact of the pandemic and inflation on public finances, which has led to a sharp rise in fiscal deficits and debts. If global public debt continues on its current trajectory, it may reach 99% of GDP by 2029, with significant imbalances in the public accounts of major economies like the US and China.
In Europe, countries like France and Italy are facing high deficits, low growth, and rising debt trajectories. The IMF forecasts that deficits in France and Italy will remain around 4-5% of GDP for the next few years, leading to further increases in public debt. On the other hand, Germany is expected to balance its accounts and reduce debt, while Spain will maintain deficits around 3% of GDP with a slight decrease in debt.
Overall, the IMF stresses the importance of fiscal containment during election years and the need for countries to address structural challenges like demographic transitions and rising interest rates. Failure to implement significant measures may result in incomplete fiscal normalization and further constraints on fiscal space in the years to come.
