Pointing to a steep surge in debt accumulation the global debt has swelled to all-time high of $237 trillion in 2017 according to a report by the Institute of International Finance. To put this in perspective, India's GDP stands at $2.3 trillion.
Pointing to a steep surge in debt accumulation the global debt has swelled to all-time high of $237 trillion in 2017 according to a report by the Institute of International Finance. Interestingly, $21 trillion was added to global debt in the previous year. To put things in perspective, India’s GDP stands at around $2.3 trillion in 2016. While this may be a reason to worry, the report says that the World-GDP to debt ratios are declining, thanks to world GDP growth running above potential.
“Despite the sharp buildup in the stock of global debt in 2017, the cyclical pickup in global growth and still-benign global financing conditions have helped bring debt ratios down slightly,” IIF noted in the report. According to the report, 36 of the 49 countries in IIF’s sample saw a drop in debt-to-GDP in 2017. According to the report, the global debt-GDP ratio now stands at 318%, about 3% lower than record high levels observed in the third quarter of 2016.
The report finds that China, Argentina, Turkey and Nigeria registered the largest build-up in debt ratios in 2017. “While China’s total debt growth slowed notably in 2017 with a drop in the non-financial corporate debt-to-GDP ratio (by some 6 percentage points to 160% of GDP), this was largely offset by rising household and financial sector debt,” the report said. In Turkey, the debt buildup was mainly driven by the financial sector, with heavy reliance on foreign borrowing in the country. The report noted that Argentina recorded a faster debt-build up in the year.
The report finds that over $2.9 trillion of Emerging Market debt (bonds and syndicated loans) will be maturing through end-2019, with USD redemptions accounting for some 27%. The report noted that India, China, Brazil and Russia have a heavy burden given the upcoming USD redemptions.
The report said that rising household debt reflects growing confidence of global consumers. “Given improving sentiment and easing credit standards for consumer loans, household debt-to-GDP rose for an 11th consecutive quarter in Q4 2017, approaching an all-time high of 60%,” the report noted.