Sovereign borrowing set to fall – OECD report

By on 13/04/2014
(c) All rights reserved, OECD

Although the economic outlook remains challenging, a new report from the OECD estimates that global gross borrowing requirements will fall in 2014.

The Sovereign Borrowing Outlook 2014 estimates a global fall to USD 10.6 trillion this year, from USD 10.8 trillion in 2013.

There is some sombre reading in the report, however. It suggests that in the OECD countries in 2014, central government debt, as a percentage of GDP, will surpass even the peak that was hit during the Second World War.

In addition, the redemption profile of central government debt, the market uncertainties around US Federal Reserve tapering, and the exits from Quantitative Easing are all identified as challenges for the coming months.

Overall, though, the OECD expects central governments to borrow less as the global economy continues to emerge from the financial crisis of 2007-2009. Equally, debt ratios are increasing at a slower pace than at the height of the crisis, and in some instances are levelling out.

The picture is of course far from homogenous. For example, looking at central government marketable debt-to GDP ratios, the global markets split into four distinct areas:

Other OECD (non-Emerging): debt ratio of around 27 per cent with some rise in 2014.

Emerging OECD: debt ratio expected to reach 33 per cent in 2014.

Euro area: ratio expected to increase slightly to about 67.4 per cent in 2014.

G7 area: debt ratio expected to hit 90 per cent in 2014.

The report found some good news concerning safe sovereign assets. There has been much debate that there will not be enough safe sovereign instruments to bring to market, despite an increase in demand. However, the OECD has found no decisive evidence that there is a lasting or structural shortage in the aggregate supply.

About Kevin Sorkin

I am the Founder and CEO of Pendragon International Media Ltd, publishers of Global Government Forum. This portfolio also includes research services and important world leading events for public servants such as the Global Government Summit, the Global Government Finance Summit, the Global Government Forum Innovation conference, Global Government Digital Summit and Putting Citizens First. I am also the founder of the Civil Service Awards and Civil Service Live, established industry leading brands and extremely important events for government. I also launched and published Civil Service World. Over the years I have established relationships with the most senior officials in government and the private sector and have built a very strong and positive reputation across the industry.

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