Dubai - Arabstoday
The world\'s largest economies face a massive $7.6 trillion (Dh27.90 trillion) bill for maturing debt this year along with a rise in borrowing costs as the Eurozone crisis rumbles on and the US struggles to reduce its budget deficit. Led by Japan\'s $3 trillion and the US\' $2.8 trillion, the amount coming due for the Group of Seven (G7) nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to data compiled by Bloomberg. Ten-year bond yields will be higher by year-end for at least seven of the countries, forecasts show. Local analysts, however, said the main concern heading into 2012 was not bond repayments but rather weak economic growth and the deleveraging of the global banking system. \"It is important to note that over three quarters of this sum is represented by the US and Japan, which have so far had no problems attracting substantial demand,\" said Philippe Dauba-Pantanacce, senior economist for global markets, Middle East and North Africa, at Standard Chartered Bank. \"Rising risk aversion has led to a diversion away from emerging markets indeed. The equity markets have been the first victims, especially in the Gulf, and any improvement will depend mostly on the betterment of investor\'s sentiment and the conviction that the bottom has been reached. We are not there yet,\" he added. Borrowing costs for G7 nations will rise as much as 39 per cent in 2011, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys. China\'s 10-year yields may remain little changed, while India\'s are projected to fall to 8.02 per cent from about 8.39 per cent. \"The amount of G7 bond redemptions will not significantly impact capital inflows to the region but the deleveraging of the global banking system, and particularly lenders in the Eurozone, will have an effect depending on the severity of the process,\" said Giyas Gokkent, group chief economist at National Bank of Abu Dhabi. \"The GCC is a net capital exporter and, typically, runs large trade and fiscal surpluses. External surpluses are then reinvested around the world. GCC is, thus, a net creditor on the aggregate. There is relatively minor direct external borrowing by sovereigns in the GCC, while external borrowing by corporate entities and the banking system tends to be more important,\" he added. Gokkent says that while the amount of G7 bonds maturing this year seems a large figure, in proportion to the size of the concerned economies it is not that alarming a situation. \"The main focus will be on the economies in the Eurozone and particularly Italy, which investors will be monitoring very closely,\" he said. \"As European banks deleverage, they will seek to cut their exposure to the GCC and other regions across the world. That will certainly have an impact in terms of the cost of borrowing and the liquidity available in local markets,\" he added.