No one likes to admit they were wrong, especially not an internationally recognized organization like the International Monetary Fund (IMF). But last week it happened: the national debt is still expected to reach 100% of the worldwide gross national product in the current year. By the middle of the decade, the debt of the countries will be at the level that the IMF had expected even before the pandemic. This applies at least to those countries with good access to the capital markets.
This result is excellent news for German exporters and companies planning foreign investments which means that incentives for consumption and investment don’t have to suffer from austerity measures. This forecast is intended to apply even though the level of debt has reached unknown heights, not only in absolute terms but also in relation to the declining growth of the national economies. The IMF sees the key to solving these apparently contradictory phenomena in the historically low level of debt service costs due to low interest rates. According to the IMF, this situation is expected to persist in the coming years. Inflationary fears are therefore rejected.
During the financial crisis in 2010/2011, on the other hand, the IMF had still advised governments to implement austerity measures. However, it has now explicitly moved away from this position during the renewed crisis. With its now issued recommendation, the IMF follows the theses of the well-known British economist John Maynard Keynes. Keynes had recommended increased government spending in times of crisis. He also quoted: 'It is a good thing to make mistakes so long as you’re found out quickly' and 'The difficulty lies not so much in developing new ideas as in escaping from old ones'. Apparently the IMF has not only followed Keynes' economic statements, but also the two quotes. German companies can flourish under these omens, both domestically and with cross-border information.
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