The Strategist

S&P: EMEA countries are increasing borrowings

03/03/2021 - 02:43

Borrowing by EMEA countries (Europe, Middle East and Africa) from the market and commercial banks (including the volume of debt securities placed on foreign and domestic markets and loans) this year will decrease compared with last year by $100bn, to $571bn, as a result the total debt of the governments of these countries may increase by the end of the year at $288bn, to $3.2 trillion, says the report of the international rating agency Standard & Poor's.

In 2020, governments in the region increased borrowing immediately by $120bn (to $672bn, net of refinancing, the 'net' amount of new placements was $395bn). This year it is estimated at $273bn. As a percentage of GDP, the figure could rise to 40.7%, while before the pandemic the share was 31% (last year it rose to 39.6%).

The biggest borrower may once again be Turkey ($78.6bn versus $68.2bn a year earlier, taking the total to $252.7bn), followed by Egypt and Russia. Egypt has the highest debt load in the region at $314bn or 88% of GDP and is likely to borrow $63bn this year compared to $57bn the previous year. Russia, S&P forecasts, may place $52.1bn worth of liabilities, compared with $74.1bn in 2020 (in which case it would rise to $270.4bn compared with $228.5 in 2020, $191.4 in 2019 and $148.1 in 2018). By comparison, Saudi Arabia increased its debt by $40 billion last year (this year a comparable increase is expected - by $37.3 billion, to $262.2 billion). The other two big borrowers are Israel, with $50.7 bln borrowing against $70.4 bln in 2020 (up to $321.2 bln), and Poland, with $44.7 bln against $48 bln (up to $279.3 bln).

By comparison, in developed countries last year, new borrowing was at a record high of $18 trillion, equivalent to 29% of GDP (up $6.8 trillion, or 12% of GDP, from a year earlier), according to the OECD. Net borrowing (net of refinancing) rose to $8.6 trillion from $1.7 trillion in 2019 - more than the total for the past five years. This year, the increase could amount to another $5 trillion. As a result, the debt-to-GDP ratio will increase by 16 percentage points by the end of 2020 and another 4 percentage points in 2021 (up to about 90% of GDP, or $60 trillion).