GLOBAL MACRO: World Gov't Debt To Hit 100% of GDP, IMF Sees Upside Risks

MNI (NEW YORK): The latest edition of the IMF's semi-annual Fiscal Monitor will be published on Oct 23, but their initial finding in the pre-release summary (link) that global public debt is "elevated" looks like an understatement. 

• They estimate global public debt will exceed 93% of global GDP ($100T nominal) in 2024, with the proportion reaching 100% by 2030 - both compared to 84% in 2019, pre-pandemic.
• Pending the full report, that actually sounds slightly more optimistic on the near-term than their April update, in which 2024 debt/GDP was seen at 94% - but their brief notes "significant upside risks" to their baseline outlook, which includes potential for the debt load to hit 115% of GDP 3 years from now in a "severely adverse scenario" (ie weak growth, fiscal slippage, higher interest rates vs baseline). Their measure of "debt-at-risk" reflects the risk that "high
  debt levels today amplify the effects of weaker growth or tighter financial conditions and higher spreads on future debt levels".
• They also point out that there is a significant amount of "unidentified debt" ("the change in debt not explained by interest-growth differentials, budgetary deficits, or exchange rate movements"), which accounts for an average 1-1.5% of GDP annually, up to 7% in times of financial market stresses.
• The outlook assumes, perhaps optimistically, that "debt is projected to stabilize or decline by 2029 in about two-thirds of the world's countries" - it's the US and China that will largely dictate the outcome, according to the IMF. In April, they saw the US debt pile rising from 123% in 2024, to 134% in 2029; China's from 89% to 110%, and it appears from their updated chart that their outlook is little changed.
• They caution that fiscal adjustment plans "fall far short of what is needed to ensure that debt is stabilized (or reduced) with high probability" - and estimate that a cumulative adjustment of 3.0-4.5% of GDP is required to stabilize/reduce debt with "high probability".
• That looks very unlikely given recent political currents, especially considering that such an adjustment would be "almost twice the size" of past adjustments.