In 2020, the sixth increase in global public debt!

Or the equivalent of 8 years of debt to fight against Kovid-19…

Photo credit © Reuters

(Boursier.com) – To fight the global epidemic, governments around the world have withdrawn an amount equal to eight years of debt, increasing their debt by more than a sixth (17.4%) – This represents the first edition of the Janus Henderson Sovereign Date Index.

As eight out of ten countries in the index were in recession, governments The couple $ 9.300 billion on his slate. This represents a seventh (14.8%) of global GDP, which was a large part of what brought the economy back on track after the global financial crisis.

The global public debt ended the year at a record level of $ 62.5 trillion, four times its 1995 total (about 273%) and the equivalent of $ 13.050 per capita!

Britain has the biggest budget shortfall!

Some countries took more loans than others to meet the challenges of the previous year. In absolute amounts, the largest economies logically borrowed the most. The United States, Japan and China alone account for more than half of the new government borrowing in 2020.

In proportion to the size of its economy, the largest debtor has been the United Kingdom, with a government deficit equal to one-fifth of GDP. But the United States, Brazil, South Africa, Spain, Canada, Japan and Singapore all have losses that are at least one-eighth the size of their economies.

Sweden and Switzerland are among the countries that have borrowed the least., But no country comes close to Taiwan, whose debt-to-GDP ratio has remained virtually unchanged from year to year, thanks to a determined response to the epidemic that has allowed its economy to grow. ..

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Even before the epidemic, governments around the world were in deficit every year Since 25 years : Their expenditure systematically exceeds the tax revenue. Fortunately, the economy has also grown significantly, creating a large tax base to carry this mountain of debt. Despite this, the increase in sovereign debt is still more than a fifth of economic growth…

A loan that can be financed cheaply…

Despite a sharp increase in borrowing, debt servicing fees have not increased. In 2020, governments worldwide were only due to pay 2.0% on their debt, up from 7.6% in 1995…

A fall in this rate means that the world’s interest bill has increased. Barely a good fifth, Despite nearly four times as much debt. Relative to GDP, the interest burden has decreased by half since 1995. No country in the Janus Henderson Index pays a higher rate of interest in 2020 than in 1995 …

Steady falling interest rates have provided a big benefit to bond investors.

Governments meet their shortfalls by issuing bonds that investors can buy and sell in the financial markets. The steady decline in interest rates over the last 25 years has generated significant returns for bond investors.

Between 1995 and 2020, the Global Government Bond Index returned a total of 308% in US dollars, nearly five times the rate of inflation in the same period!

The year 2021 will again see a sharp increase in public borrowings. About 4 trillion dollars, Or $ 768 per person. However, thanks to solid economic recovery, the highest debt ratio should be behind us…

Jim silinski, The head of fixed income, underlines: Bond markets are Large machines to measure solvency and economic performance of each country. They determine how much a government will have to pay to borrow. They are not only important for bond investors. Fixed interest rates on bond markets Has an impact on the value of each asset, From housing to equity markets ”.

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as explained Bethany Payne, International Bond Portfolio Manager at Janus Henderson: The notion of debt carries a moral meaning, such as to avoid something. But this moral vision ignores Importance of public lending to support the economy in times of crisis like in 2020. The loan is at an all-time high, but the financing cost is so low Loan was the right decision. Economic development is the least painful way to absorb large public debt.Recovery after Kovid-19 will be very uneven. Service-oriented economies were given a tough competition in 2020, Like uk, Is expected to rebound faster than manufacturing economies such as Germany, which was less than the decline in global demand in 2020. Many countries have also focused their recent indebtedness on relatively short-term lending. For these loans, there is a real risk of refinancing large amounts of debt at a large rate in the future.


© 2021, Boursier.com


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