Global debt to reach $310 trillion this year says IIF

Global debt rose by more than $9.5 trillion during the first three quarters of 2023, surpassing $307 trillion –over $60 trillion higher than in 2018 — according to the latest Global Debt Monitor report from the Washington-based Institute of International Finance (IIF).

The IIF now anticipates that global debt will reach $310 trillion by the end of the year.

The report said two-thirds of this debt originated from mature markets (MM).

The biggest debt increases were seen in the US, Japan, France and the UK.

In emerging markets (EM), the debt buildup was sharpest in China, India, Brazil, and Mexico.

By sector, the increase in debt levels has been more evident in the government sector, with fiscal budget deficits remaining well above pre-pandemic levels in many mature and emerging market economies.

“The global debt-to-GDP has remained broadly stable at around 333% this year,” said the report.

“Across geographies, the decline in MM debt ratios has broadly offset the rise in EM debt ratios.

“However, EM debt ratios topped 255% in Q3 2023 — over 32 percentage points higher than in Q3 2018.

“The surge in EM debt ratios was more evident in Russia, China, Saudi Arabia, and Malaysia, while Chile, Colombia and Ghana experienced the largest declines.

“Around 80% of the MM countries in our sample witnessed a decline in debt ratios, while Malta, Norway, Japan, France, Estonia, and Lithuania were the exceptions, posting higher debt ratios.

“Looking ahead, we anticipate the global debt ratio to resume its upward trend as global growth momentum remains weak, and inflationary pressures continue to ease.”

The monitor added: “The debt service burden of the private non-financial sector (households and corporates) continues to increase across major countries.

“This trend is particularly pronounced in China, reflecting years of rapid debt accumulation, a structural economic slowdown, and ongoing stress in the real estate sector.

“While private sector debt remains largely manageable in many countries, rising interest rates have heightened vulnerabilities in certain segments of their economies — posing significant concerns for ruling parties as the 2024 elections approach.

“In the U.S., the rise in consumer debt vulnerabilities has been more evident among younger voters, including Generation Z and Millennials.

“Notably, the share of credit card borrowers’ newly delinquency rates reached multi-year highs of 2% in Q3 2023.

“Globally, with bank credit creation to private sector borrowers on the wane in many countries, signs of increasing vulnerability among firms with low credit ratings — especially in Europe — have become more apparent.

“This trend is also reflected in the rising number of corporate bankruptcies …”