Economic and financial uncertainty, exacerbated by the effects of the war in Ukraine and the Middle East, is taking its terrible toll globally. The alarm comes from the Institute of International Finance, in its latest report on “The Quest for Sustainability.” The crisis triggered by high interest rates that has affected nearly every country in the world has pushed planetary debt to record levels.
The Iff expresses concern because “public debt has reached alarming levels in many states and the global financial architecture is ill-prepared to manage the risks associated with tensions in domestic markets.” Here are the (monstrous) numbers and the whys of the crisis.
How much global debt is worth: record figures
According to the data, in the first half of 2023, global debt grew by $10 trillion to a staggering total: $307 trillion. The trillion-dollar increase from a decade ago is as much as 100 trillion. The remaining balance of public and private liabilities globally thus increases the already substantial fears of the most “high-profile” economies on Earth.
The overall picture of interest rates skyrocketing to record levels, as mentioned, has also caused the debt figure to soar accordingly. In a nutshell, it should be said. Household debt appears to be falling in the developed and rich First World, while it is rising in the emerging and poor group of countries.
The global debt-to-GDP ratio now stands at around 336 percent, up 2 points from 334 percent in the fourth quarter of 2022. Experts pointed out a significant reversal: after seven consecutive quarters (21 months) of decline, beneficiaries of the post-pandemic climate, the trajectory was upward again in the first half of 2023.
The change in the debt-to-GDP ratio is attributable to inflation trends. And its value, according to the Iff, will exceed 337 percent by 2024. With the crisis in prices and wages set to deepen, as already observed with the abnormal growth in rates in Europe and the US. The latter has shifted much of the burden of bank credit onto the shoulders of households and businesses.
Which countries are the most indebted in the world
There are obviously nations that, more than others, have contributed decisively to the run-up in total debt. Topping this unvirtuous list are France, the United States, Japan and the United Kingdom, but also China, India and Brazil.
The first four alone are responsible for more than 80 percent of the debt accumulation in the first half of 2023, while the second group has shown the most consistent growth among markets classified as “emerging.” In these cases, there has been a marked increase in euro bond issues to protect against dollar competition.
The Institute of International Finance report also notes how Saudi Arabia, Poland and Turkey were the top borrowers from international markets, revealing once again their foreign financing needs.
Debt-to-GDP ratios also remain above pre-Covid levels in countries such as South Korea and Thailand, while in more developed countries they have fallen to their lowest value in two decades.
Experts conclude that “in rich markets, consumer debt is still at manageable levels, which could still allow central banks to make increases.” Renewing the fears of millions of savers.