Global debt at record $258 trillion – 331% of GDP

The Institute for International Finance (IIF) said on Thursday that global debt surged to a record $258 trillion in the first quarter of 2020 as economies around the world shut down due to the coronavirus pandemic.

The IIF, which represents banks and financial institutions, said in its latest report the global first-quarter debt-to-GDP ratio rose by more than 10 percentage points to a record of 331%.

“While this marks the largest quarterly increase in global debt ratios on record, the actual rise in debt was only $1.2 trillion — well below the average quarterly rise of $2 trillion over 2015-2019,” said the IIF.

“However, available data on issuance suggests that the pace of debt build-up has accelerated since March, largely reflecting the massive global fiscal and monetary response to the pandemic.

“With some $11 trillion in global fiscal stimulus approved and another $5 trillion in the pipeline, gross debt issuance hit an eye-popping record of $12.5 trillion in Q2 — vs. a quarterly average of $5.5 trillion in 2019.

“Governments accounted for over 60% of gross issuance in Q2 …

“The corporate sector accounted for over 65% of the rise in the global debt-to-GDP ratio in Q1 2020.

“While total debt in the financial sector has risen by $8 trillion since 2016 to $64 trillion in Q1, over the same period non-financial corporate debt rose by $12 trillion to $75.5 trillion, a record high at 95% of GDP.

“Looking ahead, we expect the rise in corporate debt to continue at an accelerated pace. 

“With abundant central bank liquidity, the decline in borrowing costs for corporates has already led to a substantial surge in corporate bond and loan issuance since March, amounting to some $4.6 trillion in Q2 — vs a quarterly average of $2.8 trillion in 2019.”