Our Analytics 9 february — 13:46

Azerbaijan stands out against gloomy background (Our comment)



The international rating agency Fitch Ratings calculated that the amount of public debt in the world at the end of last year at market exchange rates reached an astronomical amount of 66 trillion dollars. This amount is equivalent to 80% of global GDP, and the rate of growth of public debt is so high that the world may soon completely sink into debt. And in order to clearly imagine how quickly the debts of the countries of the world are growing, it is enough to note that now they are almost twice the 2007 figure.

At the same time, according to the agency, the debt of developed countries remains relatively stable near the level of 50 trillion dollars since 2012. But the debts of developing countries (emerging markets) have jumped over the same period from 10 trillion to 15 trillion dollars. The most significant rates of increase were observed in the region of the Middle East and North Africa (by 104%) and countries located south of the Sahara (by 75%). Although the percentage increase of debt in these countries is indeed high, in nominal terms, they account for only an insignificant part of total debt — less than $1 trillion in each region.

The share of 11 countries with the highest AAA rating, however, accounts for about 40% of the global public debt. This figure has not changed much over the past two decades. The United States (AAA rating, the outlook is stable) is currently the country with the largest debt size - about 21 trillion dollars. And the amount of US government debt rises by about $1 trillion annually. For comparison, we note that the volume of debt of France (AA, the forecast is stable), Germany (AAA, the forecast is stable), Italy (BBB, the forecast is negative) and the UK (AA, the forecast is negative) at the end of last year was in the range of 2.4-2.7 trillion dollars.

The top three in terms of government debt also includes Japan (12 trillion dollars) and China (6 trillion dollars).

As can be seen, the amount of US debt, the economic achievements of which President Donald Trump speaks at all levels, leaves much to be desired. And how true is it to talk about the achievements, which, by the way, Trump ascribes to himself, if the national debt of the United States increased by more than 2 trillion dollars in just the two years of his presidency - from January 20, 2017. Moreover, the CNN television channel even claims that the public debt 'during the control by the Republicans of the House of Representatives and the Senate of the US Congress almost reached 22 trillion dollars (21.974 trillion).' And the already exorbitant debt load of the United States in connection with the growth of the budget deficit risks becoming uncontrollable. Last summer, Republican Congressman Andy Biggs pointed this out, calling disproportionately high budget spending to be fuel for the rising 'debt fire.' He recalled that budget allocations should not exceed 700 billion dollars, and last year they already reached 1.3 trillion dollars.

But it has not been forgotten yet, as during the election campaign of 2016, Trump announced that he would solve the problem of the country's huge national debt in two presidential terms, that is, in eight years. Then Trump expressed confidence that after his reforms and the revision of trade agreements, economic growth would come that would allow the United States to pay the debt in cash. And later, already at the post of the head of state, he declared that the funds received from the trade duties introduced by the United States would be used to pay off the national debt of the country. However, whether the trade duties did not justify themselves, or whether his entire economic policy stalled, the debts continued to grow at a higher rate. And if this pace continues, Trump is unlikely to hold out until the end of his first term.

Fitch, of course, painted a very gloomy picture, but it acquires altogether disturbing contours in the calculations of the International Monetary Fund, which believes that a huge global debt can cause another economic catastrophe. Moreover, according to the IMF estimates, the world owes $184 trillion - about 225% of global GDP, or more than $86 thousand for each inhabitant of the Earth. Moreover, this indicator takes into account data only at the end of 2017, but on the basis of information provided by 190 countries since 1950.

Who are the largest borrowers in the world, according to IMF calculations? Well, the same great powers - the United States, China and Japan, which have accumulated more than half of the global debt, which exceeds their share in world production. At the same time, the foreign debt of our neighbour, Russia, although it is considered one of the lowest in the world, is $525 billion, or 18.7% of GDP. True, the IMF believes that by 2023 this figure will reach 20.4% of GDP, but this is also a very moderate debt burden. In addition, Russia eliminated the budget deficit, its expenditures exceeded revenues by 1.5% of GDP last year, and this is a surplus.

And on this gloomy background, Azerbaijan stands out somehow, the country's external debt last year fell from 22.8% to 19% of GDP, that is, by almost 4%. Yes, our foreign debt is not only low, but it tends to decrease.

Well, no matter what one thinks, the level of global public debt is very high. As a result of the current situation, many states are in a weak position in the face of tightening financial conditions associated with the start of raising interest rates in the world. This dictates the need for large-scale reforms in all countries of the world. In many countries, including developed ones, these reforms are being carried out, but, as analysts admit, they are so ineffective that they do not know how to significantly change the current situation.

And once again one wants to return to Azerbaijan. Along with the low level of public debt, the country is actively reforming literally all sectors of the economy, which is bearing fruit. Therefore, the government fears not its own weaknesses, but the influence of external factors, which generally are developing in an undesirable way.

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