Thursday, September 28, 2017

28/7/17: Climbing the Deficit Mountains: Advanced Economies in the Age of Austerity


Just a stat: between 2001-2006 period, cumulative Government deficits across the Advanced Economies rose by SUD 5.135 trillion. Over the subsequent 6 years period (2007-2012) the same deficits clocked up USD 14.299 trillion and over the period 2013-2018 (using IMF forecasts for 2017 and 2018), the cumulated deficits will add up to USD 8.197 trillion. On an average annual basis, deficits across the Advanced Economies run at an annual rate of USD0.86 trillion over 2001-2006, USD 2.375 trillion over 2007-2012 and USD 1.385 trillion over 2013-2017 (excluding forecast year of 2018).

As a percentage of GDP, 2001-2006 saw Government deficits for the Advanced economies averaging 2.68% of GDP annually in pre-crisis era, rising to 5.42% of GDP in peak crisis years of 2007-2012, and running at 2.98% of GDP in 2013-2017 period. Looking at the post-crisis period, return to pre-crisis levels of Government spending would require

In simple terms, there is a mountain of deficits out there that has been sustained by cheap - Central Banks’ subsidised - funding, the cost of which is starting to go North. The cost of debt financing is a material risk consideration.



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