OECD Sovereign Borrowing Outlook 2021

Government funding needs and debts, which surged dramatically in 2020 as fiscal deficits increased and economies contracted in the wake COVID-19 crisis, will remain high in 2021

The upsurge in government spending and reduced revenue collection in the wake of the COVID-19 crisis mean that the gross borrowing needs of governments have risen significantly. OECD governments borrowed USD 18 trillion from the markets in 2020, equal to almost 29% of GDP. Compared to 2019, this was 60% more in absolute terms, and 12 percentage points higher relative to GDP. This year’s survey results forecast a continuation of this upward movement in 2021, albeit at a slower pace. However, 2021 projections are subject to a high degree of uncertainty largely due to the pace of the pandemic, the global economic outlook and changes in government fiscal policy responses.

The level of outstanding central government marketable debt for the OECD area is expected to increase from USD 47 trillion in 2019 to almost USD 56 trillion in 2020, and to USD 61 trillion by the end of 2021. At the same time, measures to contain the spread of the virus and tackle the health crisis caused extensive short-term economic disruption in the OECD area. In recent months, however, prospects for an eventual path out of the crisis have improved, as vaccination campaigns are under way in several countries. Hence, the OECD estimates that economies will recover gradually in 2021, following the last year’s sharp contraction. Against this backdrop, the average level of central government marketable debt-to-GDP ratio for the OECD area is estimated to increase by around 20 percentage points between 2019 and 2021, and reach over 90% of GDP in 2021. However, if large-scale containment measures remain in place and potential additional fiscal policy support needs to be pursued, then, debt-to-GDP ratio may escalate further in 2021.[…]