00:00Well, it's been a week of warnings from the International Monetary Fund.
00:04Key economic worries highlighted include public debt, trade tariffs and the global growth outlook.
00:11In a series of statements, the IMF said the global economy is performing best than expected
00:16but still falls short of where it needs to be.
00:20The organisation also warned that global public debt is on track to exceed 100% of GDP by the end of the decade.
00:28Well, let's talk now to Vicky Price, the international economist.
00:32Vicky, this is cheery reading, isn't it?
00:34The IMF warns global government debt could top 100% of GDP by the year 2029,
00:39which is the highest, incidentally, since the Second World War.
00:44What risks does all of this pose for global economies?
00:49Well, the first thing to say is that there was some optimism in their report.
00:52They upped the figures of their expectation for 2025,
00:55and that was because there was a lot more trade with the US that happened in the first half of the year
01:00because everyone started selling to the US in anticipation of the tariffs, so that's one thing.
01:05Nevertheless, they haven't really done very much for next year and the year after.
01:10And you're quite right.
01:11I mean, one of the issues is the debt.
01:12I mean, remember, of course, a huge amount of debt was collected or at least issued,
01:18and therefore loads and loads of pension funds, foreign countries, depending on whether they had spare funds and others,
01:25and lots of savings went into funding a lot of debt that COVID required for the economists to get out of it.
01:35So that was one of the reasons.
01:36Follow the financial crisis as well, during which period, of course, the authorities had to intervene,
01:42and during the period after, post-financial crisis, that continued in terms of the support that needed to be given to economists.
01:48So we've had COVID.
01:49We had the war since that, the war in Ukraine.
01:52So it's not very surprising.
01:54So it's not necessarily because countries are going out and embarking on lots and lots of projects,
02:00which are costly and therefore need to go out and borrow.
02:04It is really partly a legacy of before, and if you continue year after year to have still deficits rather than surpluses in your fiscal balance,
02:16then you end up with debt continuing to rise.
02:18And I think that's one of the concerns that the IMF has.
02:22And, of course, it looks particularly at the U.S., which is a little bit different to other countries,
02:27is also cutting taxes and increasing its debt because it really wants to move the economy in a different direction.
02:36Some will argue, of course, that deficits simply don't matter.
02:39We should stop getting wound up about this as long as economies keep growing.
02:43I mean, that's a fair position, isn't it?
02:47Well, it's true.
02:48But, of course, if that money all goes to fund the debt, and, of course, that debt is quite expensive,
02:53then it takes quite a lot of resources to just service the debt.
02:56This is the problem that the U.K. has right now, for example, and also the U.S.,
03:00because in both countries the yields are very high, and bond yields are high.
03:04In other words, yes, everyone is prepared to fund your deficits, but they expect to get quite a lot of interest for it.
03:11And also, while they fund your deficit, they will not necessarily go and invest in productive stocks and shares.
03:17Forgetting for a moment what's happening in the tech sector in the U.S. and possibly elsewhere,
03:22and also what's happening in defense.
03:23I mean, the reality is that money is not being invested sufficiently to get the economists to move into a sustainable growth pattern.
03:30And that is, I think, what is worrying the IMF,
03:34and that if we start also looking at how to handle that debt, which is increasing at present,
03:39and starting cutting spending, which actually they do recommend in a number of areas,
03:44then that growth that you spoke about gets reduced quite significantly.
03:48You've got to pity national governments, haven't you, considering cuts to social spending,
03:53which was tried recently in the U.K., unsuccessfully, we should say,
03:57and at the same time also being pressured very heavily to increase defense spending.
04:02I mean, it really is a bit of a pickle, isn't it?
04:06Absolutely. And of course, politically, it's a very hot topic because nobody wants welfare cuts,
04:13and we've seen the attempts of the U.K. to do so, which haven't succeeded.
04:16And you've seen also what's happening in France right now, where some of the pension reforms,
04:21which were suggested earlier by the Macron government,
04:24and which have brought down, you know, a few of his governments already,
04:30because, of course, he's the president, but there is a prime minister,
04:33and the prime ministers themselves have been changing quite a lot,
04:36is because they can't get their budgets through because they had pension reform,
04:40which would reduce the amount that the government spends on welfare.
04:44But what's happened now for the government, the current one, the new one,
04:47to survive is that they've dropped that for the moment.
04:49So, yes, you're absolutely right.
04:51It's very, very difficult to cut welfare, and, indeed, the pressures on defense are increasing.
04:56What's happening in Europe, of course, is that we're moving towards,
04:58maybe, funding defense across the region,
05:03so not paying very high interest rates as you borrow,
05:06because probably, you know, Germany being involved now a lot more.
05:09And that is a help.
05:10But if each country is trying to do it individually, then that's a real, real burden.
05:15Vicky, good to see you.
05:16Thanks so much for that.
05:17Vicky Price, the international economist.
05:18Vicky Price, the international economist.
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