The Strategist

IMF: Global debt can’t stop growing

05/16/2018 - 11:42

The global volume of debt burden reached a new record level. The total debts of states, corporations and households now amounts to $ 164 trillion, which is equivalent to 225% of global GDP, the International Monetary Fund calculated. The previous record was fixed in 2009 against a background of a recession - 213% of GDP.
In fact, countries have not reduced their debt burden after the global crisis of 2008-2009. Its consistent growth has been recorded since the 1950s, the fund, which launched yesterday a database on the debts of 190 countries, points out. A small reduction in the burden since the crisis was observed only in the private sector.

More than half of the total global debt now falls on the US, China and Japan ($ 48.1 trillion, $ 25.4 trillion and $ 18.2 trillion, respectively). In general, developed economies have $ 119 trillion in liabilities; the figure of developing countries reaches $ 44 trillion (another $ 1 trillion in low-income countries). The first increased mainly state debt, the second - corporate borrowing (for ten years they doubled up to 160%).

The largest increase in debt over the past decade was provided by China, which accounted for about 40% of new borrowing and three-fourths of the growth in the private sector (mainly due to growth in bank lending). 

The Institute of International Finance (IIF) notes that rising rates in the US have already led to an increase in risk premiums for the debts of developing countries issued in the national currency (as long as this trend is mainly for short-term obligations). In addition, many countries pre-increased borrowing in hard currency, which will allow them to wait for a period of higher borrowing costs, the IIF believes. Nevertheless, the total portfolio investment in debt securities in emerging markets could fall this year to $ 255 billion against a peak of $ 315 billion in the past. This is the first such decline since 2015 (at that time, however, the inflow into debt securities amounted to only $ 39 billion), the IIF notes.