The International Monetary Fund (IMF) has raised concerns about the United States’ fiscal deficit, citing it as a significant threat to the global economy. The IMF also expressed worries about escalating tensions in the Middle East, highlighting their potential to destabilize international markets.
The US fiscal deficit is projected to reach 7.1% next year, which is three times higher than the average for other advanced economies. This imbalance could have far-reaching implications across the globe. China is also facing economic challenges, including weakening demand and a housing crisis, while the UK and Italy are under pressure to address their spending and revenue discrepancies.
Investor anxiety is mounting as the US approaches 2025, with concerns about potential fiscal policies. Donald Trump has hinted at making his 2017 tax cuts permanent if reelected, while Democratic policies have been criticized for excessive spending on healthcare and social security.
Despite the US being a key driver of global economic growth, with an estimated growth rate of 2.7% for this year, the IMF cautioned about persistent inflation that could affect the Federal Reserve’s ability to lower interest rates. Recent spikes in retail sales suggest that the Fed might scale back on rate reductions, leading to losses in European stock indices.
In the Middle East, tensions have surged, with the Vix index reaching levels not seen since the conflict in Gaza. The IMF warned about the potential economic fallout from the Israel-Hamas conflict, with Gaza’s economy described as “wiped out” and significant impacts felt across the region.
For 2024, the IMF expects economic growth in the Middle East and North Africa to slow to 2.6%, citing ongoing political turmoil and uncertainty. The region has been further destabilized by recent attacks and disruptions to trade routes, impacting countries like Jordan, Lebanon, and Egypt.
While some countries have shown resilience, others, like Lebanon, continue to struggle. Wealthier Gulf states have fared better due to diversified income sources and controlled oil production, but overall growth remains below historical averages.
In conclusion, the IMF emphasized the importance of international support and attention to address the economic challenges facing the Middle East, especially in conflict-affected countries like Sudan and Yemen.