The International Monetary Fund (IMF) painted a concerning picture for the United States’ fiscal outlook, with upward revisions to the budget deficit and mounting worries over the country’s national debt burden.
In its latest October Fiscal Monitor, the IMF forecasts a deficit that will remain persistently high and national debt levels that are unlikely to stabilize by the end of the decade.
The Washington-based financial institution emphasized that U.S. debt, along with China’s, has a “low probability of stabilizing by 2029.”
Deficit Forecasts Revised Up
The IMF now expects the U.S. budget deficit for 2024 to hit 7.6% of gross domestic product (GDP). That’s up from the 6.5% estimate released in April.
This marks a significant upward revision, reflecting increased government spending, slower fiscal adjustments, and a growing strain on federal finances.
The outlook for 2025 has also worsened, with the deficit now anticipated at 7.3%, compared to 7.1% previously. For 2026, the deficit forecast was nudged up to 6.7%, a modest increase from the April estimate of 6.6%.
Notably, the IMF projects that the U.S. deficit will remain above 6% of GDP until at least 2029, underscoring the long-term fiscal pressure facing the country.
| Government deficit as % of GDP (Oct. 2024 FM) | Government deficit as % of GDP (Apr. 2024 FM) | |
| 2024 | 7.6 | 6.5 |
| 2025 | 7.3 | 7.1 |
| 2026 | 6.7 | 6.6 |
| 2027 | 6.2 | 6.2 |
| 2028 | 6.2 | 6.4 |
| 2029 | 6 | 6 |
National Debt Expected To Climb To 132% Of GDP By 2029
While the deficit projections have been revised upward, the IMF’s forecast for U.S. debt offered a marginal slight relief—though still concerning.
The U.S. national debt is now expected to reach 132% of GDP by 2029, a marginally lower figure compared to the 133.9% estimate in April. Despite this minor downward revision, the debt burden remains on a troubling trajectory.
The reduction in the debt-to-GDP ratio stems largely from an improved outlook for U.S. economic growth. In its World Economic Outlook published a day earlier of the Fiscal Monitor, the IMF revised U.S. economic growth upward for the coming years.
The U.S. economy is now expected to grow by 2.8% in 2024, up from the 2.7% previously forecasted in April, and by 2.2% in 2025, compared to the earlier estimate of 1.9%.
Read also: US Economy Eyes 3.4% Growth In Q3: Is Soft Landing Turning Into Reacceleration?
| Government debt as % of GDP (Oct. 2024 FM) | Government debt as % of GDP (Apr. 2024 FM) | |
| 2024 | 121 | 123.3 |
| 2025 | 124.1 | 126.6 |
| 2026 | 126.6 | 128.9 |
| 2027 | 128.4 | 130.7 |
| 2028 | 130.2 | 132.6 |
| 2029 | 131.7 | 133.9 |
Risks Ahead
"Delaying adjustment would be costly," the IMF warned.
"With debt risks elevated in most countries and debt growing at a faster pace than in the pre-pandemic years in large countries such as the United States, postponing adjustments would only make the required correction larger.”
Addressing the unsustainable trajectory of the U.S. debt burden will likely require a combination of spending cuts and revenue increases.
According to the IMF, options on the revenue front could include raising indirect taxes, such as sales taxes or excise duties, as well as progressively increasing income taxes.
The IMF also highlighted that fiscal policy in systemically important countries like the U.S. can generate “significant spillovers” that affect the global economy.
Higher borrowing costs in the U.S., driven by rising debt and deficits, can have ripple effects on other countries, particularly emerging markets.
The potential spillovers from U.S. fiscal imbalances are a key concern for global markets. As one of the world's largest economies, the U.S. plays a crucial role in shaping global financial conditions.
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