According to a report from the Institute of International Finance, the world is mired in $315 trillion in debt.
This global debt wave was the largest, fastest and most far-reaching debt increase since World War II and coincided with the Covid-19 pandemic.
“This increase represents the second consecutive quarterly increase and was driven primarily by emerging markets, where debt rose to an unprecedented high of over $105 trillion – $55 trillion more than a decade ago,” the IIF said in its quarterly Global Debt Monitor report released in May.
Around two-thirds of the $315 trillion owed comes from mature economies, with Japan and the United States contributing the largest share of this mountain of debt.
However, the debt ratio of mature economies – considered a good indicator of a country’s ability to repay debt – has generally fallen.
On the other hand, emerging markets held $105 trillion in debt, but their debt-to-GDP ratio hit a new high of 257%, pushing the overall ratio higher for the first time in three years.
According to the report, China, India and Mexico were the largest contributors.
The IIF identified stubborn inflation, rising trade tensions and geopolitical tensions as factors that could pose significant risks to debt dynamics and “put upward pressure on global financing costs.”
“While the health of fiscal balance sheets should provide a buffer against ‘higher interest rates for an extended period’ in the near term, public budget deficits are still higher than pre-pandemic levels,” the IIF added.
Of the $315 trillion in debt, household debt, which includes mortgages, credit cards and student debt, was $59.1 trillion.
Corporate debt, which companies use to finance their operations and growth, stood at $164.5 trillion, with the financial sector alone accounting for $70.4 trillion of that. The national debt of $91.4 trillion made up the rest.
Source link
2024-05-29 11:31:46
www.cnbc.com
