State borrowings will reach 10.5 trillion. dollars in the international market in 2023, which is almost 40% above the historical average before the COVID-19 pandemic, according to S&P estimates, with the largest increase recorded in Europe. At the same time, the chamber predicts that the net value of energy-related fiscal measures at the international level will reach $1.65 trillion. dollars in 2022-2023 (1.7% of global GDP).

In more detail, as S&P notes, despite lower global inflation and China’s withdrawal from the zero Covid-19 policy, the challenges to the global macroeconomic outlook in 2023 remain significant. He expects global growth to slow significantly as core inflation remains high and central banks continue to raise interest rates and keep them high until 2024. “The 137 countries we are evaluating will borrow $10.5 trillion. dollars from the markets in 2023, which is similar to the amount borrowed last year,” the house notes.

S&P estimates that this amount is almost 40% higher than the historical average before the COVID-19 pandemic.

He points out that the constant pressure on spending due to rising energy prices is one of the main reasons for high borrowing, especially in Europe. The twin shocks from the pandemic and high commodity prices, triggered first by the post-pandemic recovery and then exacerbated by the war between Russia and Ukraine, prompted governments to deploy and maintain fiscal measures to mitigate the impact on households and businesses. This twin shock also increased the fragmentation of domestic political landscapes, making fiscal consolidation more difficult.

“We estimate that the combined cost of the pandemic and the energy crisis will reach $10 trillion. dollars in the period 2020-2023,” emphasizes S&P. The cost includes the impact of COVID-19 on public finances from revenue cuts and spending increases of approximately $8.4 trillion in 2020-2021. dollars, as he explains. Even if the impact of the two shocks is difficult to separate, S&P estimates that the cost of fiscal action to boost commodity prices, especially energy prices, will be around 1.65 trillion euros. dollars in 2022-2023

Europe will see the biggest increase in borrowing amid stagnation in growth and fiscal pressure, including high energy prices. In total, according to S&P, European governments will issue about 1.75 trillion. dollars of gross long-term debt this year, an increase of $348 billion, or 20%, over 2022. While natural gas prices in Europe are returning to pre-war levels between Russia and Ukraine, they remain historically high. The high cost of energy will force governments to maintain tax breaks and subsidies at a time when the European economy is stagnating or even shrinking. This will come at the expense of a large budget deficit and increased borrowing amid much higher financing costs.