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Please see below an article from AJ Bell received yesterday afternoon – 25/11/2021 – analysing the difference between developing and advanced economies when it comes to borrowing:

There is a big difference in the public finances of emerging market countries and those in the developed world.

For the most part emerging market countries have much lower levels of government debt to GDP (gross domestic product).

According to the IMF (International Monetary Fund) the average debt to GDP ratio in 2021 for emerging markets and developing economies is 63.4%, a little more than half the average for advanced economies at 121.6%.

There is some variation within this: Russia, for example, comes in at just 17.9% while India’s debt to GDP ratio is 90.6% and Brazil’s is also above 90%.

In 2021 the averages for the developed world and emerging markets were lower and the difference between the two was also smaller – the respective averages coming in at 69.7% and 48.1%.

The IMF is projecting for the gap to close somewhat, by 2026 it is forecasting an average of 118.6% for advanced economies against 68.1% for the developing world.

The divergence, in part, reflects the differing responses to two great crises of the past two decades as countries in the West have taken advantage of their ability to issue debt at low interest rates to help cushion the economic impact of the 2007/8 financial crisis and the Covid-19 pandemic.

The result being that, on this measure at least, emerging economies look to be at something of a structural advantage.

Please continue to check back for our latest blog posts and updates.

Alex Kitteringham