Absolute debt levels of countries continue to increase and total outstanding global sovereign commercial debt stock will rise to reach an all-time high of $44trn by the end of this year, according to rating agency Standard & Poor’s (S&P).
In a report entitled Sovereign Debt 2017, S&P expects that the United States and Japan will be the “most prolific borrowers” in 2017, accounting for 60% of total borrowing, followed by China, Italy and France.
S&P projects that the 130 countries it rates will borrow an equivalent of R6.8trn from long-term commercial sources in 2017, which represents a 4% decrease in long-term commercial debt issuance.
Net borrowing as a share of countries’ gross domestic product has been decreasing gradually from 3.3% in 2014, as governments extend their debt maturity profiles in a low interest rate environment and as a result of gradual improvements in fiscal consolidation in several countries.
According to S&P’s calculations, Japan will face by far the highest debt rollover ratio (including short-term debt) in 2017, reaching 66% of GDP. Japan currently has the highest general government debt ratio among all the countries rated by S&P at 254% of GDP in 2016.
S&P forecasts that gross borrowing from commercial sources in 2017 will increase to $1.07trn in 20 major emerging market countries.
China is the biggest emerging market borrower with more than a third of the total borrowings, followed by Brazil and India.
Emerging markets’ total commercial debt stock will continue to go up. By year-end 2017, S&P projects that total commercial sovereign debt stock will have risen to $7trn, up by $648bn from December 2016.
According to its calculations, Egypt will again face the highest debt rollover ratio (including short-term debt), reaching 29% of GDP. The country has an “unusual dependence” on short-term debt, which accounts for 34% of total debt.
S&P expects China’s gross commercial borrowing to rise compared to 2016, both in absolute terms – by $25bn – and as a share of the sample total (from 31% in 2016 and 33% in 2015).
“We forecast Brazil and India to borrow amounts equivalent to $191bn and $112bn, respectively. China, Brazil and India will borrow 63% of the 20 emerging market sovereigns,” S&P said in its report.
South Africa’s net debt to GDP is expected to increase to 48% in 2017, Finance Minister Pravin Gordhan said in his 2017 Budget Review.