Financial net worth, or the difference between governments’ financial assets and liabilities, shows the government’s ability to meet its financial obligations and can provide a more accurate picture of a country’s fiscal position. The assets reflect a source of additional funding and income available to governments; liabilities reflect debts accumulated over time. A consistent increase in the government’s financial net worth over time indicates good financial health. Conversely, net worth may be depleted by public debt indicating a worsening of the fiscal position that could affect confidence and increase risk.
In 2017, general government financial net worth of OECD countries amounted to -70% of GDP, meaning that governments on average were holding significantly more liabilities than assets. In four OECD countries – Greece (-149%), Italy (-125%), Japan (-124%) and Portugal (-108%) –, the negative financial net worth was larger than the size of the country’s GDP in 2017. These countries accumulated substantial debt over the past years, particularly in the years following the 2007-08 economic crisis. For the same year, 8 out of 35 countries reported having positive financial net worth with Norway reporting the highest level at +308% of GDP, followed by Finland (+59%). In the case of Norway, it reflects the USD 1 trillion of the Norwegian Wealth Fund, managed by the Central Bank on behalf of the Ministry of Finance and composed of equity, bonds and real estate investments. This fund was set in 1990 to manage the petroleum resources in the interest of present and future generations. In Finland, this value reflects the positive performance of employment pension schemes’ net financial assets.
After a decade since the international financial crisis and with few exceptions, general government financial net worth in OECD economies is far from rebounding to pre-crisis levels. However, between 2017 and 2018, for most countries with available information, an average improvement of 0.4 p.p. was experienced. The exceptions are the United States (1.3 p.p.), Chile (1.0 p.p.) and France (0.2 p.p.). In these three countries, the recent deterioration of their net worth is primarily driven by additional public debt issuance.
On average, the financial net worth in OECD countries represented USD -34 591 PPP per capita in 2017, which more than doubled since the OECD average level in 2007 (USD -15 523 PPP). In 2017, the highest positive per capita financial net worth was recorded in Norway (USD 191 667 PPP) and the lowest in Japan (USD -51 921 PPP).
