2018 - 2019 Edition of Citi Perspectives for the Public Sector

Citi Perspectives for the Public Sector |  2018-2019 3 Welcome to Citi Perspectives for the Public Sector. A s we reflect on the events of 2018 and consider potential developments on the horizon in 2019, we are focused on how to help our public sector clients manage the risks they face in today’s environment of volatility and uncertainty. Headwinds are clearly increasing. Monetary policy tightening and higher rates in the U.S., combined with the dollar’s steady appreciation, are putting pressure on many countries — especially emerging markets — given high debt issuance since the financial crisis. According to the IMF, debt in advanced economies is 105% of GDP — levels not seen since World War II; public debt in emerging markets and middle-income economies is almost 50% of GDP — levels last seen during the 1980s debt crisis. At the same time, growth has become less predictable. It is threatened by a potential trade war between some of the world's most important economies and dramatic shifts in political and economic policies by others. The result is that globalization, which has underpinned the global economy for the past 30 years, is being tested as never before. The outcome of the many developments underway in both the short- or long-term is unclear. However, while every country faces unique circumstances and challenges, all are interconnected and many share similar characteristics. Governments around the world must find ways to generate more growth, address high levels of sovereign debt (and certain concentrations of private debt) and manage the impact of higher trade tariffs and protectionism (often spurred by nationalism or populism). At the same time, governments need to keep their eye on long-term targets to reduce inequality and manage new threats such as cyber warfare and, in some instances, increasing numbers of displaced people. Despite these challenges and the turbulent backdrop, many governments are making significant progress, both in tackling debt and in achieving the Sustainable Development Goals that aim to bring prosperity, fairness and opportunity to all. In the pages that follow, Citi experts who work with our government clients around the globe assess the risks, outline best practice, identify solutions and explain how we can help our clients drive positive economic and social development. Among the highlights are a look at some of the instruments and services available to governments seeking to invest in risk reduction, such as risk management funds, catastrophe bonds and multilateral development bank loan modification, and an assessment of the sustainability bond market and its potential to become a mainstream $1.0 trillion market. Citi’s public sector banking team is proud of our role as a trusted advisor that understands the opportunities and challenges you face in achieving your goals. As always, we would be delighted to continue a dialog with you on the many topics included in the 2018-19 edition of Perspectives and welcome any feedback. Julie Monaco Global Head for Public Sector, Corporate and Investment Banking, Citi