Euro area helps global debt hit record $296 trillion

Global debt soared $4.8 trillion to a new record of $296 trillion in the second quarter of 2021, according to the The Institute of International Finance (IIF) Global Debt Monitor.

After a slight decline in Q1 of 2021, total debt in “mature” markets resumed its upward trend in Q2, increasing by over $1.3 trillion to nearly $205 trillion — 418% of GDP.

The debt buildup in mature markets was most substantial in the Euro area, largely driven by Germany and France.

The US dollar value of total debt in the Euro area increased by $1.3 trillion to over $56 trillion in Q2.

The IIF report said global debt — which includes government, household, corporate and bank debt — is now more than $36 trillion above the pre-pandemic level.

The rise in debt was sharpest in emerging markets, with total debt topping $92 trillion in Q2 — up from over $87 trillion in 2020.

Households contributed most to increasing global debt levels in the first half of 2021, in part fueling housing prices.

“With housing prices on the rise, global household indebtedness increased by $1.5 trillion in the first six months of 2021 and now stands at some $55 trillion,” said the report.

“During the same period, government and corporate debt grew by slightly less, at around $1.3 trillion and $1.2 trillion, respectively.

“Nearly one-third of the countries in our sample saw an increase in household debt-to-GDP ratios in H1 2021, particularly in Switzerland, Russia, and Korea.

“Of note, the U.S., China, and Brazil witnessed the largest rise in the USD value of household debt.”

However, the global debt-to-GDP ratio, at around 353% in Q2 2021, is 9 percentage points below the all-time high of 362% in Q1 2021.

China’s debt levels are rising rapidly.

“With total sectoral debt up by an estimated $2.3 trillion in Q2 to reach an all- time high of over $55 trillion, the pace of China’s debt buildup has been much steeper than in other countries,” said the report.

“The non-financial sector accounted for over 40% of the rise.

“Although the rate of growth in total debt remained slower than in H2 2020, government bond issuance rebounded to hit a new record of some $780 billion in Q2.”