Fiscal policies are heading in opposite directions. Interest payments are set to rise in all countries, as debt issued at low rates gradually matures and must be refinanced on current terms.
Germany’s primary deficit is expected to widen significantly in 2026 and 2027. Having benefited from nominal growth that was significantly higher than the apparent interest rate on its debt, Germany is expected to see this situation reverse from 2030 onwards. Driven by infrastructure investment and increased defence spending, primary public expenditure (excluding interest) is expected to rise sharply from 2026 onwards.
The reduction in the primary budget deficit remains very limited compared with the level observed in 2024. The low level of real GDP growth in 2026 (0.3%) does not prevent nominal growth from remaining above the effective interest rate (due to inflation). So far, the consolidation of public finances has relied on increased revenue.
Having returned to positive territory since 2024, Italy’s primary balance is expected to continue improving. Weak nominal growth and the gradual rise in the apparent interest rate on debt would continue to weigh on Italy’s public finances.
Primary surpluses are expected to rise steadily until 2032 (reaching +1% of GDP by then). Nominal growth is expected to remain above the apparent interest rate on public debt throughout the forecast horizon. Public expenditure excluding interest payments is set to rise slightly to around 42.9% of GDP through to 2032.
The US primary deficit is projected to remain sizable through to 2032. Population ageing exerts structural pressure on mandatory health and pension spending, while fiscal consolidation does not appear to be on the policy agenda. The primary deficit is estimated to have widened to -4.2% of GDP in 2026, from -3.2% in 2025.
The UK’s primary balance is expected to return to surplus from 2028. The rise in interest rates is expected to gradually feed through to the apparent rate on UK public debt. UK fiscal consolidation is expected to rely mainly on a structural increase in tax revenue.
Japan’s primary balance deteriorated in 2026 to -1.2% of GDP, ending five consecutive years of improvement. Nominal growth would continue to exceed the apparent interest rate on Japan’s debt, but this advantage would erode gradually. Revenue is projected to fall in 2027–2028 as a result of tax cuts.
