Join our daily newsletter At The Bell to receive exclusive market insights
- Global debt is expected to hit a record of US$277 trillion (roughly A$378 trillion) by the end of the year thanks to pandemic-induced spending
- According to a report from the Institute of International Finance, the world’s debt has already soared by US$15 trillion (A$20.5 trillion) this year alone
- Overall debt from developed markets jumped to 432 per cent of GDP in the third quarter, compared to a ratio of 380 per cent at the end of 2019
- In the United States, total debt is primed to hit US$80 trillion (A$109 trillion) this year, up from US$71 trillion (A$97 trillion) in 2019
- Europe’s debt has grown by about US$1.5 trillion (A$2 trillion) since the start of 2020 to a total of US$53 trillion (A$72.3 trillion)
- The global economy is anticipated to shrink 4.4 per cent this year and expand by 5.2 per cent in 2021
With government and corporate spending ballooning to all-time highs thanks to the COVID-19 pandemic, global debt is expected to hit a record of US$277 trillion (roughly A$378 trillion) by the end of the year.
A report published on Wednesday by the Institute of International Finance (IIF), titled “Attack of the Debt Tsunami”, said the world’s debt has already soared by US$15 trillion (A$20.5 trillion) this year alone, nearly half of which came from governments of developed nations.
Overall debt from these developed markets jumped to 432 per cent of GDP in the third quarter, compared to a ratio of 380 per cent at the end of 2019.
Meanwhile, the debt-to-GDP ratio of emerging markets grew to almost 250 per cent, with China reaching 335 per cent.
“There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity,” the IIF warned.
In the United States, total debt is primed to hit US$80 trillion (A$109 trillion) this year, up from US$71 trillion (A$97 trillion) in 2019.
Across the Atlantic, Europe’s debt has grown by about US$1.5 trillion (A$2 trillion) since the start of 2020 to a total of US$53 trillion (A$72.3 trillion).
Among developing economies, Lebanon, China, Malaysia and Turkey have seen the greatest increases in non-financial sector debt ratios so far this year.
Even with record-low borrowing costs worldwide, governments in these emerging markets have seen steadily declining revenues, which has made paying down debt “much more onerous.”
According to further estimates by the IIF, the global economy is anticipated to shrink 4.4 per cent this year and expand by 5.2 per cent in 2021, as lockdowns and travel restrictions brought on by the ongoing COVID-19 pandemic weigh heavily on economic output.
