27 February 2017
The global ratings agency S&P Global has forecast a $315 billion or 4 percent decrease in commercial borrowing by the 130 sovereigns it currently rates, to reach $6.8trn in 2017. The US and Japan will again be the most prolific borrowers this year, accounting for 60 percent of the total, followed by China, Italy, and France.

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, the ratings agency said yesterday.

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 US'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).

© The Peninsula 2017