Global credit analyst Fitch Ratings expects minimal improvement in budget deficits of most countries in the second half of the year due to several geopolitical tensions and high interest rates.

In its Global Sovereigns Mid-Year Outlook 2024, Fitch on Friday said that global economic growth will likely turn moderate.

“Global sovereign credit conditions are broadly neutral for 2024, as moderately weaker global economic growth and persistent strains on public finances are balanced by lower inflation and some easing in financial conditions,” Fitch said.

Fitch said recent issuances of government global bonds signal a need for funding more projects and debt refinancing amid prospects of still elevated rate by the US Federal Reserve and a stronger dollar.

As a result, Fitch said median budget deficits will likely settle at 2.8 percent of gross domestic product (GDP) and government debt-to-GDP ratio of 55.2 percent this year.

Global dual-tranche bonds

The Philippines issued its first global dual-tranche bonds last month, raising $2 billion.

The global bonds consisted of 10-year and 25 year fixed rate bonds, the Department of Finance said.

“Proceeds of this issuance will be directed towards the overall welfare of all Filipinos — more infrastructure projects, improved social services, a better healthcare system, and quality education for them,” Finance Secretary Ralph Recto said.

He added the 25-year bonds will be used as proceeds from these bonds will be used to refinance projects that comply with the country’s Sustainable Finance Framework.

Aside from possibly sticky inflation and high interest rates in the next months, Fitch said countries might see moderate growth in trade income.

Geopolitical risks to persist

“Geopolitical risks — including war in Ukraine and the Middle East, US-China rivalry and more protectionist trade and industrial policies — are likely to persist,” Fitch said.

The Philippines’ Development Budget Coordination Committee expects the debt-to-GDP ratio to decline from 60.2 percent last year to 55.9 percent in 2028.

This is better than the internationally accepted threshold of 70 percent recommendation of the International Monetary Fund.