Pandemic Impact: Global Debt Reaches New Record High Of $315 Trillion

Confidence UbaniJune 2, 20241 Mins read260

A recent report from the Institute of International Finance (IIF) reveals that global debt has reached $315 trillion, marking the most significant, quickest, and most extensive surge in debt since World War II. This surge coincides with the onset of the COVID-19 pandemic and highlights worldwide economic challenges.

The IMF’s Global Debt Monitor report, released in May, showed that emerging markets account for a significant portion of this debt, with an unprecedented surge to over $105 trillion. This represents an increase of $55 trillion from a decade ago. Mature economies, including Japan and the United States, contribute most of the global debt.

While mature economies have seen a decline in their debt-to-GDP ratio, indicating an improved ability to manage debt, emerging markets face a new challenge. Their debt-to-GDP ratio has soared to 257%, driven by countries like China, India, and Mexico.

The IIF identifies various risk factors, including inflation, trade disputes, and geopolitical tensions, which could elevate global funding costs. Despite healthy household balance sheets, government budget deficits remain elevated compared to pre-pandemic levels.

Breaking down the $315 trillion debt, household debt amounts to $59.1 trillion, encompassing mortgages, credit cards, and student loans. Business debt, crucial for corporate operations and growth, stands at $164.5 trillion, with the financial sector alone accounting for $70.4 trillion. Public debt constitutes the remaining $91.4 trillion.

The first quarter of 2024 saw an additional $1.3 trillion increase in global debt, pushing it to record levels. After three consecutive quarters of decline, the global debt-to-GDP ratio resumed its upward trend in Q1 2024, signalling ongoing economic challenges worldwide.

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