Public Debt Sustainability in Developing Asia: An Update

Abstract

The paper updates debt sustainability analysis (DSA) for developing Asia, conducted in 2011. With the benefit of hindsight, the accuracy of the earlier debt ratio forecasts and underlying macroeconomic assumptions is assessed. In general, the standard DSA is found able to predict debt ratios fairly accurately. The fan chart analysis confirms the importance of integrating stochastic analysis to the standard DSA. Looking forward, debt ratio projections suggest benign outlook remains for the region as a whole, country heterogeneity notwithstanding. The importance of macroeconomic forecast accuracy is emphasized and the need to capture volatility by appropriate risk analysis tools is suggested.