Global debt now three times size of world economy

Jan 16, 2019

Global debt rose 12 per cent in the September quarter to $US244 trillion ($339 trillion), and is now more than three times the size of the world's economic output, according to the Institute of International Finance.

Global debt has risen over 3 percentage points since 2017, exceeding 318 per cent of GDP in the third quarter of 2018, the IIF said in a report, slightly lower than the all-time high of 320 per cent in the third quarter of 2016, helped by the cyclical pickup in global growth.

Most of the rise in global debt levels since 2008—more than 75 per cent—is from non-financial companies and governments worldwide, the institute said.

Total government debt exceeded $US65 trillion in 2018, up from $US37 trillion a decade ago.

Over the same period, non-financial corporate debt rose by $US27 trillion to more than $US72 trillion last year, to hover near a record high of 92 per cent of GDP.

While the surge in corporate debt was concentrated in emerging markets, government debt rose faster in mature markets, the institute said.

The rise in borrowing in other sectors has been relatively slow: household credit grew over 30 per cent to $US46 trillion, and financial sector debt grew 10 per cent to some $US60 trillion.

Since 2016, debt has been growing fastest in the household sector in emerging markets, up 30 per cent to more than $US12 trillion. China has accounted for much of this growth, with household debt up some 45 per cent to $US6.8 trillion in nominal terms.

However, Czech Republic, India, Mexico, Korea, Malaysia, and Chile have all seen household debt grow by over 20 per cent since 2016.

A few mature markets—notably France, Belgium and Finland—have also seen significant growth in household debt, the institute also said.

Some $US3.9 trillion of EM bonds and syndicated loans will mature by the end of 2020 and FX redemptions are estimated to be some $US1.3 trillion.

Refinancing needs in US dollars are relatively high for Egypt, Nigeria, and Colombia (nearly 80 per cent of redemptions), followed by Lebanon (77 per cent), Chile (72 per cent), and Argentina (73 per cent).

Source: The Australian Financial Review