Page 14 - Policy Economic Report - October 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Asia as an engine of merchandise trade, 80% of which is transported by sea
The report shows that in 2023, main maritime waterways connecting the East and West accounted
for at least 36% of global containerized trade. These include routes from East Asia to North America,
Northern Europe, and the Mediterranean. On the other hand, South-South routes linking the
developing world of East and Western Asia, Oceania, Sub-Saharan Africa, and Latin America, achieved
the highest increase (+9.3%) in its volume of global containerized trade in 2023.

By sector, technology exports from Asia – most notably green energy and artificial intelligence-related
products – are expected to drive further recovery in global merchandise trade. Iron ore trade will
continue to grow, given a firm demand from steel producers, particularly in Asia. Global gas trade is
also projected to increase, considering expanding infrastructure for the storage and transport of
liquefied natural gas, as well as rising demand from Asia and Europe.

4. Global Public Debt on rise- IMF
Global debt is expected to exceed $100 trillion, or about 93 percent of global Gross Domestic Product
by the end of this year and will approach 100 percent of GDP by 2030. This is 10 percentage points of
GDP above 2019, that is, before the pandemic.

The fiscal outlook of many countries might be worse than expected for three reasons: large spending
pressures, optimism bias of debt projections, and sizable unidentified debt.

• The fiscal discourse across the political spectrum has increasingly tilted towards higher
spending. Countries have focussed to increasingly spend more to cope with aging and
healthcare; with the green transition and climate adaptation; and with defence and energy
security, due to growing geopolitical tensions.

• On the other side, experience suggests that debt projections tend to underestimate actual
outcomes by a sizable margin. Realized debt-to-GDP ratios five-years ahead can be 10
percentage points of GDP higher than projected on average.

According to IMF, a severely adverse scenario global public debt could reach 115 percent of
GDP in three years—nearly 20 percentage points higher than currently projected. This could
be due to several reasons: weaker growth, tighter financing conditions, fiscal slippages, and
greater economic and policy uncertainty.

• Sizable unidentified debt is another reason for public debt to end up being significantly higher
than projected. An analysis of more than 30 countries finds that 40 percent of unidentified
debt stems from contingent liabilities and fiscal risks governments face, of which most are
related to losses in state-owned enterprises. Historically, unidentified debt has been large,
ranging from 1 to 1.5 percent of GDP on average, and it increases sharply during periods of
financial stress.

October 2024 Page | 13