IMF warns of looming global debt crisis as Hungary faces mounting risks

According to the IMF’s latest report, the global economy is teetering on the brink of another financial crisis: global public debt has reached unprecedented levels, while Hungary is sliding deeper into trouble amid growing deficits and a slowing economy.

IMF: Global debt remains above 235% of world GDP

The International Monetary Fund (IMF) reported on Wednesday that an increase in government borrowing had offset the decline in private-sector credit, resulting in little overall change in total debt last year, which stood at 235% of global gross domestic product (GDP).

In its statement, the IMF noted that private debt had fallen below 143% of global GDP — the lowest level since 2015 — due to declining household debt and minimal changes in non-financial business debt.

By contrast, public debt rose to nearly 93%, according to IMF data, reflecting the aggregated and weighted debt levels of governments, businesses and households, as reported by Anadolu.

In US dollar terms, total debt edged up slightly to $251 trillion, with public debt rising to $99.2 trillion and private debt falling to $151.8 trillion.

“These global averages mask significant differences across countries and income groups. While the United States and China continue to play a dominant role in shaping global debt dynamics, our April Fiscal Monitor report highlights that in many countries, debt and deficit levels remain high and concerning compared with historical norms — both in advanced and emerging economies,” the IMF stated.

In the United States, public debt rose from 119% to 121% of GDP, while in China it increased from 82% to 88%.

In advanced economies excluding the US, public debt declined by more than 2.5 percentage points to 110% of GDP. “Growth in some large advanced economies, such as France and the United Kingdom, was offset by declines in Japan and smaller economies such as Greece and Portugal,” the report noted.

In developing economies excluding China, public debt dropped to below 56% on average.

According to the statement, governments should address these trends by prioritising credible medium-term fiscal adjustments aimed at reducing public debt. Creating an environment that stimulates economic growth and reduces uncertainty would help ease public debt burdens and encourage private-sector investment.

IMF: Hungary in difficult economic situation

An IMF fact-finding mission held talks in Budapest with Hungarian authorities between 5 and 17 June as part of its annual Article IV consultation. In the concluding statement of the visit, the IMF painted a bleak picture of Hungary’s economic situation. The organisation said the country’s economy had stagnated for three years, while inflation remained well above the central bank’s 3% target. Government measures that distort market dynamics — such as price caps, interest and margin limits, windfall taxes and subsidised loans — are fuelling uncertainty.

Outlook and risks

The IMF forecasts growth of just 0.7% in 2025, driven by consumption, with expansion reaching 2% in 2026. Inflation may fall to 4.5% by year-end but is unlikely to return to target levels before 2027. While the external balance may benefit from battery and automotive exports, several risks loom large: geopolitical tensions, energy price volatility, delays in receiving EU funds, and postponed fiscal adjustments could all weaken growth and undermine investor confidence.

Fiscal policy

According to the IMF, current measures are insufficient to meet the government’s deficit targets. While the government aims to reduce the deficit to 4.1% of GDP in 2025 and 3.7% in 2026, the IMF forecasts deficits of 4.8% and 4.6%, respectively. Public debt could climb to 79% by 2030, compared with 73.5% in 2024. To ensure sustainability, the IMF recommends at least a two-percentage-point fiscal adjustment in the coming years, alongside more efficient public spending and a fairer, more effective tax system.

Monetary policy and inflation

The IMF believes the National Bank of Hungary must maintain a tight monetary policy stance, as inflation is likely to remain above the target range in 2025. There is no room for interest rate cuts, with only gradual easing expected in the coming years. The Fund urges the prompt removal of price caps and market interventions, arguing that these do not deliver lasting disinflation.

Financial sector

While Hungary’s banking sector is fundamentally stable and well-capitalised, the IMF highlights several risks: a growing share of foreign currency loans, weaknesses in the commercial real estate market, and rising housing prices. The organisation welcomed the strengthening of banks’ risk buffers but criticised the easing of lending caps, which could encourage excessive borrowing and threaten stability.

Structural reforms

To boost productivity, the IMF calls for comprehensive reforms — notably improving the business environment, reducing bureaucracy, simplifying insolvency procedures, and supporting innovation and young enterprises. The government’s industrial policy programmes have so far delivered limited tangible results, and greater emphasis should be placed on horizontal, market-friendly reforms.

Energy and governance

The IMF notes that high corporate energy costs are undermining the competitiveness of Hungary’s energy-intensive economy. To accelerate the green transition, the Fund recommends replacing general subsidies with targeted cash support and efficiency investments. The organisation welcomed the 2023 judicial reform but called for further steps to enhance transparency, improve the integrity of public procurement, and ensure better access to EU funds.

In summary, the IMF concludes that Hungary must restore investor confidence and lay the groundwork for sustainable growth through disciplined fiscal policy, consistent monetary tightening, and comprehensive structural reforms. The full report can be accessed here: IMF report on Hungary

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