Tags: Global | Government | Debt | Levels | Explosive | Path | S&P

Global Government Debt Levels Are on ‘Explosive Path’, S&P Says

Friday, 08 Oct 2010 09:38 AM

Public debt in some of the world’s largest economies is on an “explosive path” as aging populations and the cost of fighting the financial crisis erode government finances, Standard & Poor’s said.

Based on current fiscal policies, median net debt as a percentage of gross domestic product in 49 economies accounting for more than two-thirds of the world’s population will rise to 245 percent by 2050, the ratings company said in an e-mailed report in London today. That compares with a 2007 forecast of 148 percent.

Budget deficits and sovereign debt have ballooned worldwide after governments spent trillions of dollars in stimulus to revive growth. In Europe, mounting fiscal problems forced Greece to seek a European Union-led bailout in May, while Irish and Portuguese borrowing costs have soared on concern that they may also need aid.

S&P estimates that the current median debt level of the 49 countries in the survey, which includes most members of the European Union, as well as the U.S., China and Australia, is about 36 percent of GDP.

As aging populations drive up costs for pensions and other social services, increases in debt will likely lead to sovereign-rating downgrades unless governments change their fiscal policies, it said.

“Population aging will lead to profound changes in economic growth prospects for countries around the world,” S&P said in the report. “The erosion in sovereign ratings would start in 2015, when hypothetical ratings on a number of highly rated sovereigns come under pressure.”

Spending pressure will push up government debt to about 750 percent of economic output in Japan by 2050, around 590 percent in the Netherlands and 510 percent in Greece, S&P said. The average government deficit may climb from a current level of 4.5 percent of GDP to more than 6 percent by the mid-2020s based on current fiscal policies, it said.

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Public debt in some of the world s largest economies is on an explosive path as aging populations and the cost of fighting the financial crisis erode government finances, Standard Poor s said.Based on current fiscal policies, median net debt as a percentage of gross...
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2010-38-08
Friday, 08 Oct 2010 09:38 AM
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