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Global debt to hit record US$277 trillion by year end on pandemic spending splurge: Report

Global debt to hit record US$277 trillion by year end on pandemic spending splurge: Report

FILE PHOTO: Line workers spot weld parts of the frame on the flex line at Nissan Motor's automobile manufacturing plant in Smyrna, Tennessee, US, Aug 23, 2018. (Photo: REUTERS/William DeShazer/File Photo)

NEW YORK: Global debt is expected to soar to a record US$277 trillion by the end of the year as governments and companies continue to spend in response to the COVID-19 pandemic, the Institute of International Finance said in a report on Wednesday (Nov 18).

The IIF, whose members include over 400 banks and financial institutions across the globe, said debt ballooned already by US$15 trillion this year to US$272 trillion through September. Governments - mostly from developed markets - accounted for nearly half of the increase.

Developed markets' overall debt jumped to 432 per cent of GDP in the third quarter, from a ratio of about 380 per cent at the end of 2019. Emerging market debt-to-GDP hit nearly 250 per cent in the third quarter, with China reaching 335 per cent, and for the year the ratio is expected to reach about 365 per cent of global GDP.

"There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity," the IIF said in its report.

Total US debt is on track to hit US$80 trillion in 2020, the IIF report said, up from US$71 trillion in 2019. In the Euro area, debt rose by US$1.5 trillion to US$53 trillion through September.

Among developing economies, Lebanon, China, Malaysia and Turkey have seen the biggest increases in non-financial sector debt ratios so far this year.

Emerging market governments' declining revenues have made paying down debt "much more onerous" even amid record low borrowing costs across the globe.

Through the end of next year, some US$7 trillion of emerging market bonds and syndicated loans will come due, about 15 per cent of which is denominated in US dollars, IIF said.

Officials from the Group of 20 last month agreed to extend the Debt Service Suspension Initiative (DSSI) freeze on official bilateral debt payments to the first half of 2021 and said they would consider another six-month extension in April.

The global economy is forecast to shrink 4.4 per cent this year and expand 5.2 per cent in 2021 according to estimates from the International Monetary Fund as pandemic-induced lock downs and travel restrictions weigh on economic output.

Source: Reuters/kv

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