• Fund expects budget deficit to exceed 6% of GDP in coming years, with federal debt continuing to rise steadily as share of GDP

ISTANBUL

The International Monetary Fund (IMF) said Wednesday the US economy is expected to grow faster this year, but warned that rising public debt poses a “growing stability risk” for both the US and the global economy.

In its preliminary findings following the Article IV consultation, the IMF noted that US policymakers are pursuing a broad agenda aimed at raising living standards and boosting economic self-sufficiency. This includes strengthening domestic manufacturing, reducing trade deficits and reliance on foreign goods, increasing energy production, lowering dependence on undocumented labor, and scaling back the federal government’s role in the economy.

The IMF said the US economy performed well in 2025, supported by strong productivity growth despite the impact of a government shutdown late last year.

While tariffs pushed up goods inflation, services inflation continued to ease, and the labor market remained close to full employment despite slower job growth. Financial conditions stayed relatively loose, stock markets reached record highs, and the federal deficit narrowed slightly to 5.9% of GDP in fiscal year 2025.

Growth is projected to rise from 2.2% last year to 2.4% this year. Inflationary pressures from tariffs are expected to fade in the coming months, and unemployment is forecast to remain around 4% in 2026–2027.

However, the IMF expects the budget deficit to exceed 6% of GDP in the coming years, with federal debt continuing to rise steadily as a share of GDP.

The Fund warned that keeping the overall deficit at 7–8% of GDP could push public debt to around 140% of GDP by 2031. It stressed the need for a clear and front-loaded fiscal consolidation plan to put debt on a downward path.

On monetary policy, the IMF said the Federal Reserve could appropriately ease restrictions during 2025 as job growth slows and second-round tariff effects remain limited. It expects the federal funds rate to fall to 3.25–3.5% by the end of 2026.

IMF Managing Director Kristalina Georgieva said the US economy is expected to remain strong this year and next but emphasized that the continued rise in public debt remains a source of concern and requires decisive action.