IMF calls for fiscal restraint in year with most elections ever

The International Monetary Fund (IMF) urged countries on Wednesday to rein in fiscal spending and rebuild their buffers, but said that could prove difficult in the world’s biggest-ever election year.

A record 88 countries, home to more than half of the world’s population, have held or are holding national elections in 2024, the IMF said, noting that governments tend to spend more and tax less during election years.

“The most acute risk to public finances arises from the record number of elections being held in 2024, which has led to it being dubbed the ‘Great Election Year,'” the IMF said in its new Fiscal Monitor publication.

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The United States will hold its presidential election in November, while voters in India will begin voting later this month. Taiwan, Portugal, Russia and Turkey have already held elections.

The IMF said budget overruns were often likely in election years, a risk amplified by increased demand for social spending. It said deficits in election years tended to exceed forecasts by 0.4 percentage points of GDP, compared to non-election years.

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Slowing growth prospects and still-high interest rates would further constrain fiscal space in most economies, it said.

The IMF said on Tuesday the global economy is set for another year of slow but steady growth, forecasting global real GDP growth of 3.2% for 2024 and 2025 – the same rate as in 2023.

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On Wednesday, it said the global economic outlook had improved in the last six months, but many countries were still struggling with high debt and fiscal deficits given high interest rates and dimming medium-term growth prospects.

Advanced economies, excluding the US, were still spending 3 percentage points more than before the COVID-19 pandemic, while emerging market economies, excluding China, were spending 2 percentage points more, the report said.

Global public debt, meanwhile, edged up to 93% of gross domestic product (GDP) in 2023 – about 9 percentage points above the pre-pandemic level. The debt increase was led by the U.S. and China, where debt rose by more than 2 and 6 percentage points, respectively.