The nominal US dollar value of global debt fell by $4 trillion in 2022 to slightly below $300 trillion — the first annual decline since 2015.
Helped by strong economic activity and high inflation, the global debt-to-GDP ratio declined over 12 percentage points to 338% of GDP in 2022 — the second annual drop in a row.
That’s according to the latest Global Debt Monitor from the Washington-based Institute of International Finance (IIF).
“Following a substantial surge in 2020-21 during the pandemic, the global debt pile shrank by some $4 trillion to $299 trillion in 2022 …” said The IIF.
“This marks the first annual decline since 2015.
“With borrowing costs on the rise — particularly for emerging markets — the retrenchment was driven entirely by mature markets, which saw total debt decline to some $200 trillion — down from over $206 trillion a year ago.
“In sharp contrast, debt in emerging markets continued its upward trend, hitting a fresh record high of $98 trillion in 2022.
“Russia, Singapore, India, Mexico, and Vietnam saw the largest rise in the USD value of their outstanding debt.”
However, the IIF reported a surge in US corporate borrowing.
“While higher funding costs along with fears over a global slowdown cut corporate borrowing in much of the world, the strength of the U.S. economy prompted a surge in borrowing among U.S. corporates,” said the IIF report.
“In fact, 2022 saw U.S. non-financial corporate debt hit over $20 trillion, increasing by over $1.7 trillion from 2021 levels — the largest annual increase on record.”
The IIF also warned of a potential new wave of debt.
“A close look at quarterly debt figures suggest that Q4 2022 might have marked an inflection point,” said the report.
“With the PBOC and the BoJ now providing substantial market liquidity, a softening U.S. dollar has markedly reduced inter- national funding pressures for many borrowers in recent months.
“Against the backdrop of increased central bank liquidity, our calculations suggest that the global debt pile increased by over $10 trillion in Q4 2022, partially eras- ing the large declines in debt levels recorded over the previous quarters in 2022.”