US, China debt pose risks for global public finances, says IMF
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The world’s two great economic rivals, China and US, will drive much of the increase in global public debt over the next five years, with US spending creating trouble for many other countries by keeping interest rates high, officials of International Monetary Fund (IMF) said in a report.
“In both economies, public debt is projected under current policies to nearly double by 2053,” the IMF said in its Fiscal Monitor, an overview of global public finance developments.
“How these two economies manage their fiscal policies could therefore have profound effects on the global economy and pose significant risks for baseline fiscal projections in other economies.”
Higher interest rates in US make life difficult for many countries by strengthening the value of the dollar against other currencies, making dollarpriced commodities more expensive and increasing debt burdens for countries that borrowed in the US currency.
“High and uncertain interest rates in US affect cost of funding elsewhere in the world,” said Vitor Gaspar, IMF director of fiscal affairs. “The impact is quite significant.”
As for China, the fund warned that a larger-than-expected slowdown in China— “potentially exacerbated by unintended fiscal tightening given significant fiscal imbalances in local governments”— can create risks for the rest of the world through lower levels of international trade, external financing and investments.
The report projected overall primary deficits would decline to
4.9% of global
GDP from 5.5% in 2023, but with substantial risks threatening public finances in many countries.
The fund noted that voters
Higher interest rates in US make life difficult for many countries by strengthening the value of the US dollar
this year will go to the polls in 88 economies representing more than half of the world’s population and GDP, in what is called “great election year.”
“Support for increased government spending has grown across the political spectrum over the past several decades, making this year especially challenging,” the report said. “Fiscal policy tends to be loo-ser, and slippages larger, during election years.” feedback@livemint.com
Atrove of anecdotes on the economy gathered by the Federal Reserve (Fed) over five decades may hold clues to predicting current US business cycle turning points, according to research published on Tuesday.
“Heterogeneity in Districtlevel economic sentiment can be used, over and above the information contained in national economic sentiment, to better forecast US recessions,” said the authors of a report on the Federal Reserve Bank of Cleveland’s website.
Using natural language processing, researchers at the Cleveland Fed and Washington University in St Louis created indexes quantifying the sentiment expressed in the text of all editions of the Beige Book going back to its creation more than 50 years ago.
The study found that these summaries are more timely than gross domestic product in determining when the nation is in a recession.
District-level sentiment was more useful, in particular in Chicago, Minneapolis, Philadelphia, Richmond and San Francisco in predicting current US business cycle turning points.
The researchers tracked the sequences of words to
The Beige Book has been published eight times a year since 1970, providing information on the US economy
gauge sentiment using machine-learning to “infer the meaning of language that might otherwise be ambiguous.”
They also found that since the pandemic, national economic sentiment has tended to paint a rosier picture than that experienced in many individual districts based on their model’s processing of the textual data.
The Beige Book has been published eight times a year since 1970, providing anecdotes and information on economic conditions from the 12 regional Fed banks as well as a national summary. It’s prepared by a designated Reserve Bank on a rotating basis and released about two weeks before each Federal Open Market Committee meeting.