Sovereign Debt Outlook: 2022 and beyond 25 FEBRUARY 2022
Miguel A. Savastano Deputy Director IMF | Monetary and Capital Markets
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Sovereign Debt/GDP—World: 2013-2021
IMF | Monetary and Capital Markets
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Sovereign Debt/GDP—Country groups: 2013-2021
IMF | Monetary and Capital Markets
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Global Macro Outlook—2022-25 End of pandemic Output growth back to pre-covid trend (AEs; most EMs) Fiscal deficits (much) lower than in 2020-21 Higher global interest rates/higher inflation Tighter global financial conditions IMF | Monetary and Capital Markets
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Debt/GDP projections—Five possible paths
Debt to GDP
C A
IMF | Monetary and Capital Markets
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B D
t1
jump
Year
drop
t*
5
t1+n
5
Debt/GDP outlook—baseline and shock scenarios WIDE BANDS
Debt to GDP
NARROW BANDS
t Year
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Debt/GDP projections: baseline scenarios
IMF | Monetary and Capital Markets
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Debt/GDP Outlook—bands around central projections Width
Shape
(degree of uncertainty)
(balance of risks)
Advanced Ecs
narrow
symmetrical
EMDEs
medium
likely symmetrical
wide
asymmetrical
Low Income Ctries
IMF | Monetary and Capital Markets
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Risk Indicators—Sovereign spreads (Feb 18, 2022) Number of countries
Low
Total
104
47
41
6
10
Europe
38
27
9
1
1
Rest
66
20
32
5
8
IMF | Monetary and Capital Markets
Spread 'bucket" Performing Stressed
Distressed
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In sum • Global economic and market conditions in the next 2-3 years will be markedly different than in the last two.
• Borrowing from advanced economies will remain sizable but debt/GDP ratios will stabilize.
• Risk of “events” in global debt markets will be higher than in recent years, but will remain manageable.
• Large EM will continue to access debt markets despite the higher costs. • Continued access by smaller EMs and MICs is less certain. Debt events are likely, but no “wave”
• The outlook for LICs will remain challenging. Many events possible, but of small size.
IMF | Monetary and Capital Markets
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THANK YOU
IMF | Monetary and Capital Markets
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