Global economy continues to grow while public debts and high bond yields pose risks
According to research by the Financial Times and Brookings Institution, while the global economy continues to grow by resisting energy shocks, rising public debts and bond yields threaten stability.
While the global economy continues to grow by demonstrating resilience against energy shocks and high oil prices, persistent inflation, rising public debts, and record bond yields pose major risks to global stability.
Resilience of the Global Economy
Despite the energy shock triggered by conflicts in the Middle East, the world economy continues its growth. While major economies such as the US, China, and India show resilience against high oil prices, artificial intelligence investments also support economic activity.
However, concerning signs are accumulating behind the strong growth indicators. Persistent inflation pressures and the heavy public debt burden rank among the primary risks threatening future economic stability.
Bangkok Summit and Warnings
The research results were published ahead of the annual meetings of the IMF and the World Bank to be held in Bangkok. The sustainability of public debts and fluctuations in bond markets are being addressed at the meetings.
Cornell University Professor Eswar Prasad stated that while the world economy maintains a strong growth outlook, policymakers' room for maneuver is gradually narrowing due to persistently high inflation and fiscal policies.
Energy Shock and Regional Differences
While oil prices exceeding $100 per barrel increase inflationary pressures, strategic reserves have partially limited the effects of this rise. The information technology sector keeps the US economy vibrant, while Germany grows through infrastructure investments.
Conversely, public debt concerns weaken the economy in France. Low-income net-importer countries constitute the most vulnerable segment against the negative effects of energy shocks.
Alarm in Bond Markets
The sharp sell-off wave in global government bonds has pushed borrowing costs to their highest levels in recent decades. Rising interest rates are increasingly weighing down the pressure on state budgets.
While the US 10-year Treasury yield and France's borrowing costs have reached their highest levels since 2002, similar peaks are observed in the UK and Japan.
Need for Structural Reform
Economists point out that the effectiveness of traditional policy tools has diminished, emphasizing that it is inevitable for governments to turn to structural reforms that will increase productivity.
The simultaneous persistence of high energy prices, inflation, and public borrowing costs remains a fundamental risk for global economic stability in the upcoming period.