Public debt levels pressure advanced economies

Advanced economies are facing significant budgetary pressure as public debt levels have approximately doubled relative to GDP compared to the turn of the century. Many wealthy nations are now paying more to borrow money than at any time since the 1990s or 2000s, with forecasts suggesting governments may spend 8% of tax revenues on net debt interest this year.

Several factors are driving these rising borrowing costs. In the United States, strong economic growth and high productivity are encouraging investment, particularly from artificial intelligence firms competing for capital. Additionally, energy shocks resulting from conflict in Iran have contributed to inflation. The rise of populism has also led to questions regarding the credibility of economic institutions, exemplified by political figures such as Donald Trump and Jean-Luc Mélenchon questioning central bank policies and interest rate decisions.