According to a recent article put out in the IMF Blog:
“advanced economies have larger balance sheets compared to emerging markets and low-income developing countries. This reflects the size of their public sectors, which generally provide more infrastructure and services. But advanced economies also have larger liabilities and, on average, lower net worth.”
So what does that mean? Almost 40 countries has a total of public sector assets (infrastructure, financial assets and natural resource reserves) worth $103 trillion. That comprises 216% of GDP.
It has been found “that having large assets does not necessarily reduce how vulnerable a country is to large debts; this will depend on the nature of the assets.” How can this situation change? Possibly with better management. According to the Blog:
“Better management of government assets could earn 3 percent of GDP in extra revenues each year—that is more than the interest payments advanced countries pay to cover their debt.”
Some countries are already doing this. Examples include: Australia, the UK and New Zealand which are all engaging in a review of their balance sheet. Jersey is making waves toward greater transparency such that by 2023 the law will really be forcing the issue. A joint Guernsey, Jersey and the Isle of Man statement included the intention to:
“bring public company registry legislation to their respective parliaments within 12 months of the EU publishing a review in 2022 outlining how their members states have created their own public registers.”
GDP can be a good indicator of wealth. When it is codified correctly it has the power to give us information about consumption levels and when GDP depletes it can be a useful red flag for new policies.
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