FRANKFURT—A global wave of government spending is propelling the world economy, marking a decisive shift from austerity to expansive fiscal policy. From the United States and Europe to parts of Asia, nations are deploying substantial stimulus packages financed by widening budget deficits, aiming to counter economic headwinds and fuel near-term growth.

According to analysis by JPMorgan, this concerted fiscal push could accelerate global growth to an annual rate of 3% over the coming six months. Economists at Apollo Global Management calculate that the stimulus will boost economic growth this year by approximately one percentage point in the U.S. and Germany, and by half a percentage point in Japan. China, for the second consecutive year, is set to run a budget deficit close to 9% of its GDP.

The spending aims to address a confluence of modern challenges: safeguarding industries from trade tensions and technological disruption, financing green energy transitions, reinforcing national defense, and supporting aging populations. "It's another symptom of the vulnerabilities bubbling under the surface of advanced economies," said Neil Shearing, Group Chief Economist at Capital Economics, citing weak private-sector demand and stagnant productivity.

This strategy carries significant risks in an era of elevated interest rates. While bond markets have so far avoided a crisis akin to 2010, the cost of debt is rising sharply. Interest payments on U.S. national debt have more than doubled in four years, with similar increases noted in Germany and Japan. The International Monetary Fund projects global public debt will surpass 100% of global GDP by 2029, a level not seen since 1948.

The political landscape is reinforcing this fiscal trend. In Europe, even far-right parties once known for fiscal conservatism are gaining ground with promises of increased spending. The approach reflects a hard-learned lesson from the past decade, that austerity is politically unpopular and can lead to strategic weaknesses.

"Geopolitics have changed," said Sahir Khan, a former Canadian parliamentary budget official, noting how U.S. trade policies are pushing allies like Canada to make "generational investments" in sovereignty and infrastructure. However, the reliance on deficits, rather than tax increases, to fund this spending raises sustainability questions.

Some economists warn that high debt levels leave economies vulnerable. A sudden loss of investor confidence or a reassessment of growth drivers like artificial intelligence could force painful fiscal adjustments. "I'm quite worried," said Ricardo Reis, a professor at the London School of Economics. "The interest bill is getting to very high levels in any kind of historic comparison."