S&P forecasts $315bn decrease in sovereigns borrowing this yearStaff Writer | February 27, 2017
S&P Global has forecast a $315bn or 4 percent decrease in commercial borrowing by the 130 sovereigns it currently rates, to reach $6.8trn in 2017.
Countries Absolute debt levels continue to increase
Absolute debt levels continue to increase. S&P projects that total outstanding global sovereign commercial debt stock will rise during 2017 by almost $1trillion to reach an all-time high of $44trn by the end of this year, up by 2.3 percent, at projected market exchange rates.
A regional breakdown shows Asia-Pacific sovereigns are expected to borrow $2.6trn, 38 percent of the total, mostly by Japan and, to a lesser extent, China and India, followed by North America (35 percent) and Europe (19 percent).
Latin America accounts for only 5 percent of the total while borrowing by sovereigns in Africa and the Middle East remains negligible by global comparison.
Some 77 percent, or $5.2trn, of sovereigns' gross borrowing will be to refinance maturing long-term debt, resulting in an estimated net borrowing requirement of $1.6trn, or 2.1 percent of the GDP of rated sovereigns.
Net borrowing as a share of GDP has been decreasing gradually from 3.3 percent in 2014, as a result of governments extending their maturity profiles in a low interest rate environment and gradual improvements in fiscal consolidation in several countries.
But they also reflect exchange rate movements: All numbers presented in this report have been converted into US dollars and therefore reflect the strengthening of the dollar against many important issuance currencies.
The $315bn reduction in expected gross long-term commercial borrowing from last year is mostly due to a reduced borrowing forecast for some advanced large issuers: Japan (-$270bn), the Eurozone (-$47bn) and the UK (-$38bn).
These reductions stem from some progress on fiscal consolidation, but are largely driven by exchange rate movements.
S&P expects many average bilateral exchange rates with the US dollar to be weaker in 2017. The U.S. gross borrowing needs to rise by $75bn this year (+3 percent).
Other sovereigns borrowing a large absolute additional amount are in emerging markets: China (+$25bn), Brazil (+$18bn), Thailand and Russia (+$ 17bn each) and India (+$10bn). ■