Debt crisis: The world’s $100 trillion time bomb continues to tick

Two weeks before a potentially era-defining election in the United States and with the world’s recent inflation crisis largely behind us, ministers and central bank governors gathered in The nation’s capital faces growing calls to reorganize its financial institutions while they still can.

The fund does annual meeting starting there on Monday, pointed to a number of themes that it hopes will impress the flurry of forecasts and research on the global economy in the coming days.

The IMF’s fiscal monitor on Wednesday will issue a warning that public debt levels will be reached 100 trillion USD this yearpromoted by China and America. Chief Executive Kristalina Georgieva, in a speech Thursday, emphasized how big that mountain of loans is. weight in the world.

“Our forecast points to an unforgiving combination of low growth and high debt – a difficult future,” she said. “Governments must work to reduce debt and rebuild buffers for the next shock – which is certain to come and possibly sooner than we expect.”

Some finance ministers may receive additional reminders even before the week is out.

British Finance Minister Rachel Reeves faced a warning from the IMF about the risk of a financial crisis. market backlash If debt is unstable. Tuesday marks the final release of public finance data before her October 30 budget.

Meanwhile, Moody’s Ratings has set a date for Friday to release a report on the situation in France, which is facing a crisis. Investors closely monitor Present. With its rating a step above its major competitors, the market will be watching for any cuts in the outlook.

For the largest borrowers, a glimpse of IMF report was published containing a grim warning: your public finances are everyone’s problem.

“Elevated debt levels and uncertainty around fiscal policy in systemically important countries, such as China and the United States, could create significant spillovers in the form of spending,” the fund said. higher borrowing costs and debt-related risks in other economies.”

Elsewhere next week, interest rate cuts in Canada and rate hikes in Russia are among the possible central bank moves predicted by economists.

Click here about what happened over the past week, and below is our summary of what’s ahead in the global economy.

America and Canada

Economists found that two reports on home sales showed that falling mortgage rates were merely stabilizing the U.S. residential real estate market. On Wednesday, the National Association of Realtors will release data on closings on previously owned homes, followed a day later by government figures on new home sales .

Economists predict a modest increase in existing and new home sales in September. Resale remains hampered by limited inventory, which keeps prices high and impacts affordability. While purchases of previously owned real estate remain at their lowest level since 2010, builders have taken advantage: New home sales have gradually increased over the past two years with the help of incentive measures.

Other U.S. data next week includes September durable goods orders, plus capital goods shipments that will help economists revise their estimates of third-quarter economic growth .The Federal Reserve also released the Beige Book, anecdotal information about the economy.

Regional Fed officials who will speak next week include Jeffrey Schmid, Mary Daly and Lorie Logan.

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

Europe, Middle East, Africa

As with other regions, attention will largely focus on Washington; More than a dozen appearances by European Central Bank Governing Council members are scheduled in the states.

Among them is President Christine Lagarde, who will be interviewed by Bloomberg Television’s Francine Lacqua in Washington on Tuesday.

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

Among the euro zone economic reports, Wednesday’s consumer confidence, the next day’s purchasing managers’ index and Friday’s ECB inflation expectations survey are likely to be the highlights. outstanding. Similarly, Germany’s Ifo Institute will release its closely watched business confidence gauge later in the week.

In addition to a possible rating review for France, S&P may also release reports on Belgium and Finland on Friday.

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

The Bank of Russia has signaled that continued inflationary pressures could lead to another interest rate hike on Friday. They raised it 100 basis points to 19% in September, and a similar move would bring the rate back to the 20% level imposed in an emergency hike after President Vladimir Putin launched a full-scale invasion into Ukraine in February 2022.

Finally, data on Wednesday from South Africa is expected to show inflation falling to 3.8% in September, raising the possibility of another rate cut next month. The central bank said it now forecasts consumer price growth to be in the lower half of its target range of 3% to 6% over the next three quarters.

Asia

Lenders in China, with a push from the People’s Government Bank of Chinais expected to join the campaign to revive business activities by cutting the prime lending rate on Monday. 1-year and 5-year term interest rates are expected to decrease by 20 basis points to 3.15% and 3.65%, respectively.

Later in the week, data will show whether the nation’s industrial profits rebounded in September after plunging more than 17% in August. The most recent numbers show the economy growing grew at the slowest rate in six quarters during that three-month period.

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

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

On Friday, Japan will report the Tokyo CPI for October, a key index that will capture changes in corporate prices at the start of the second half of the fiscal year.

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

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

Among regional central banks, many top officials will attend IMF meetings in Washington. Reserve Bank of Australia Deputy Governor Andrew Hauser held a fireside chat on Monday and three days later the bank released its annual report.

Reserve Bank of New Zealand chief Adrian Orr spoke on policy on the sidelines of the IMF meeting, and Uzbekistan’s central bank will decide on Thursday whether to pause its second meeting after the cuts. interest rate in July or not.

Latin America

Brazil watchers will be keen to see the weekly forecast in the central bank’s Focus survey due out on Monday.

Expectations on inflation, borrowing costs and debt figures have recently turned gloomy due to doubts about the government’s fiscal discipline.

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

Argentina’s GDP proxy data will likely show South America’s second-largest economy is in recession and remains in a recession that is likely to last until 2025.

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

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

The data here is unlikely to dampen the outlook for Brazil’s central bank tightening policy again on November 6, while prompting Banxico to pause its third straight cut at its meeting on November 6. November 14.