In the next three decades, US federal debt is likely to increase more than double the gross domestic product (GDP) to around 202% by 2051. According to the Congressional Budget Office, the debt growth will increase fiscal crisis risk despite the dangers appearing to be low in the near term.
US federal debt to double by 2051
The non-partisan arm of Congress said in its long-term budget outlook that federal debt will grow from the current 102%. Interestingly, its forecast of debt growth of 195% by 2050 from its previous report remained unchanged. However, debt net interest payments will continue to remain low up to 2031 before rising rapidly over the following two decades. Also, the CBO has predicted a ten-year Treasury yield at 2.6% by 2050,after inflation from the current nominal yield of 1.54%, which is the highest after over a year.
Equally, the CBO has projected that two Social Security trust funds for people with disabilities and seniors will be exhausted earlier than they had predicted last year. Notably, the report doesn’t reflect on the $1.9 trillion stimulus plan that Congress is currently working on and it comes at the back of Treasuries selloff this past week sending yield up. Confidence among investors is growing as the labor market, and US economic growth is likely to experience stronger than expected recovery with states lifting restrictions and vaccination rolls out.
China expects 6% GDP growth in 2021
On the other hand, China has set a meek economic growth of 6% this year and promised the creation of more jobs as the second-biggest economy charts its economic recovery from the COVID-19 pandemic. Last year, China’s dropped its GDP target for the first time in almost two decades as the COVID-19 pandemic ravaged the country’s economy. The country’s GDP grew 2.3% in 2020, which is the weakest in almost 44 years, but it was the only major economy globally that reported growth.
China’s Premier Li Keqiang said in the 2021 work report that the country’s growth rate has been set at more than 6% for 2021. Li said that in setting the target, the country has considered economic activity recovery. Interestingly, this target was below analysts’ consensus prediction of 8%. The conservative growth is a reflection of the public effort demonstrating a return to economic stability following the pandemic turmoil. It also keeps a lid on debt appetite and risk.
China proposes new electoral rules to crackdown opposition in Hong Kong
Despite promising strong economic growth, Chinese officials are executing an electoral overhaul in Hong Kong, which is likely to cripple the opposition. Chinese leaders unveiled drastic proposals, during the opening of the National People’s Congress, which will weaken pro-democracy opposition in Hong Kong. The push for new rules in Hong Kong is part of President Xi Jinping’s move to crack down opposition to Chinese rule following the months-long demonstrations in 2019. The election overhaul proposals will lock out beleaguered democratic camp out of election contests in Hong Kong.
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