Debt crisis: World’s $100 trillion timebomb keeps ticking

Two weeks before a US election that will likely define a new era, and with the latest global inflation crisis drawing to a close, ministers and central bankers gathered in the nation’s capital are facing intense calls to get their finances in order while they still can.

The box that Annual meetings She has already flagged some topics that she hopes to highlight through a barrage of forecasts and studies about the global economy in the coming days.

The International Monetary Fund’s Comptroller Report released on Wednesday will contain a warning that public debt levels are set to rise $100 trillion this yearLed by China and the United States. In a speech on Thursday, Executive Director Kristalina Georgieva stressed the extent of this borrowing mountain. Its weight on the world.

“Our forecasts point to an unforgiving mix of low growth and high debt – a difficult future,” she said. “Governments must work to reduce debt and rebuild the reserves needed to weather the next shock – which will certainly come, and perhaps sooner than we expect.”

Some finance ministers may receive further reminders even before the week is over.

UK Treasurer Rachel Reeves has already faced a warning from the International Monetary Fund about the risk of a crisis Market backlash If the debt is not settled. Tuesday marks the final release of fiscal data before its budget scheduled for October 30.

Meanwhile, credit ratings agency Moody’s on Friday identified a possible report on France, which is facing Intensive investor scrutiny at present. With its valuation a step higher than major rivals, markets will be watching for any downgrade in expectations.

As for the biggest borrowers of all time, here’s a look International Monetary Fund report The already published book contains a grim warning: Your public finances are everyone’s problem.

“High debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, could generate significant spillover effects in the form of higher borrowing costs and debt-related risks in other economies,” the Fund said.

Elsewhere over the next week, a rate cut in Canada and a rate hike in Russia are among the possible central bank moves that economists are anticipating.

Click here For what happened last week, here is a summary of what will happen in the global economy.

United States and Canada

Economists say two home sales reports show that lower mortgage rates are only helping to stabilize the US residential real estate market. On Wednesday, the National Association of Realtors will release data on contract closings for previously owned homes, followed the next day by government numbers on new home sales.

Economists expect modest increases in September sales of existing and new homes. Resales continue to be hampered by limited inventory that keeps asking prices high and hurts affordability. While purchases of previously owned properties remain near the weakest pace since 2010, builders have benefited: new home sales have gradually risen over the past two years with the help of stimulus.

Other US data next week includes durable goods orders for September, as well as shipments of capital goods that will help economists adjust their estimates of economic growth in the third quarter. The Fed also releases its Beige Book, a narrative read of the economy.

Regional Fed officials speaking next week include Jeffrey Schmid, Mary Daly and Lori Logan.

Meanwhile, the Bank of Canada is increasingly expected to cut interest rates by 50 basis points after inflation slowed to 1.6% in September and some labor market metrics remained weak.

Europe, Middle East, Africa

As with other regions, attention will largely focus on Washington; More than a dozen ECB Governing Council members are scheduled to appear in the United States.

That includes President Christine Lagarde, who will be interviewed by Bloomberg TV’s Francine Lacqua in Washington on Tuesday.

Likewise, Bank of England Governor Andrew Bailey will speak in New York on Tuesday, while Swiss National Bank President Martin Schlegel is scheduled to appear on Friday.

Among the eurozone economic reports, consumer confidence on Wednesday, PMIs the next day, and the European Central Bank’s survey of inflation expectations on Friday may be the highlights. Likewise, Germany’s Ifo institute will release its closely watched business confidence gauge at the end of the week.

Aside from a possible review of France’s rating, Standard & Poor’s may also release reports on Belgium and Finland on Friday.

Heading east, two central bank decisions are likely to attract attention, starting Tuesday with Hungary, which could keep borrowing costs unchanged.

The Bank of Russia indicated that continued inflationary pressures could lead to another hike in interest rates on Friday. They raised interest rates by 100 basis points to 19% in September, and a similar move would return the rate to the 20% level imposed in an emergency increase after President Vladimir Putin began a full-scale invasion of Ukraine in February 2022.

Finally, data released on Wednesday from South Africa is expected to show inflation slowing to 3.8% in September, boosting the chances of another interest rate cut next month. The central bank said it now expects consumer price growth to remain in the lower half of its 3% to 6% target range over the next three quarters.

Asia

Lenders in China, with a push from the People’s Bank of China, are expected to join the drive to revive business activity by cutting interest rates on their loans on Monday. The 1-year and 5-year interest rates are expected to fall by 20 basis points to 3.15% and 3.65%, respectively.

At the end of the week, data will show whether the country’s industrial profits rebounded again in September after falling more than 17% in August. The latest figures showed that the economy expanded at the slowest pace in six quarters during that three-month period.

Elsewhere, the region gets a batch of PMIs on Thursday, including from Japan, Australia and India.

Singapore is expected to report on Wednesday that consumer inflation slowed in September, with price growth updates for the month also from Hong Kong and Malaysia.

On Friday, Japan will release the Tokyo CPI report for October, a leading indicator that will capture corporate price changes at the beginning of the second half of the fiscal year.

South Korea will release third-quarter growth numbers on Wednesday which could show the economy’s momentum has slowed marginally.

During the week, South Korea releases early October trade statistics, while Taiwan and New Zealand release September trade figures.

Among the region’s central banks, several prominent officials will attend the IMF meetings in Washington. RBA Deputy Governor Andrew Hauser has a friendly chat on Monday, and three days later the bank publishes its annual report.

Reserve Bank of New Zealand President Adrian Orr talks policy on the sidelines of an International Monetary Fund conference, and Uzbekistan’s central bank will decide on Thursday whether to pause for a second meeting after a rate cut in July.

latin america

Brazil watchers will be keen to see the weekly forecast in the central bank’s so-called concentration survey, which is due to be released on Monday.

Inflation expectations, borrowing costs and debt metrics have recently taken a decidedly bleak turn given doubts about the government’s fiscal discipline.

In Mexico, GDP data should be consistent with the loss of momentum that has led many economists to lower their third-quarter growth forecasts. The economy is expected to slow for a third year in 2024.

Argentina’s GDP data will likely show that South America’s second-largest economy is faltering and remains in the grip of a recession that will likely extend into 2025.

The Central Bank of Paraguay holds its meeting to set interest rates; Policymakers have kept borrowing costs at 6% over the past six months with inflation rising slightly above the 4% target.

On the prices front, neither investors nor policymakers will be thrilled by the mid-month inflation reports from Brazil and Mexico given the early consensus for higher headline readings.

Data here are unlikely to do anything to undermine the prospects of the Brazilian central bank tightening policy again on November 6, while at the same time it will give the Banxico pause on a third successive cut at its meeting on November 14.