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OECD Sovereign Borrowing Outlook 2018

Nearly a decade after the outbreak of the financial crisis, sovereign debt figures remain at historically high levels while elevated debt service ratios pose a significant challenge against a backdrop of continued fiscal expansion in most OECD countries. Sovereign debt across the OECD area has been rising significantly since the global financial crisis (GFC), albeit at a slower pace in recent years compared to the period 2008-2012. Looking ahead, OECD governments are expected to borrow approximately USD 10.5 trillion from the markets in 2018, similar to 2017. In line with the borrowing figures, central government marketable debt is expected to increase slightly from USD 43.6 trillion in 2017, to around USD 45.0 trillion in 2018. This pattern reflects the continued expansionary stance of fiscal policy in major OECD countries in recent years.

While total borrowing requirements for the OECD area have been stable, sovereign debt burdens remain at elevated levels of over 70%. The 2018 outlook for debt-to-GDP ratio is projected to be 73%, slightly lower than 2017, mainly owing to robust economic growth expectations. The November 2017 edition of the Economic Outlook projects 2.4% economic growth, supported by fiscal policy stimulus, for the OECD area in 2017 and 2018.

Overall, risk-based debt management strategies implemented in most of the OECD area helped governments to achieve relatively well-structured debt portfolios. Nevertheless, the high level of debt redemption profiles observed following the GFC is expected to persist, primarily due to the increasing refinancing burden from maturing debt combined with continued budget deficits in most OECD countries. Total debt service of OECD governments for the next three years is around 40% of the outstanding marketable debt, one fifth of which is due in the next 12 months. That said, high debt service ratios pose significant challenges in terms of re-financing risks for sovereign debt management.