Global Debt Reaches Unprecedented Levels Exceeding $324 Trillion
International Institute of Finance reports a significant increase in global debt, driven by major economies, with emerging markets facing record bond redemptions.
A report released today indicates that global debt has surged by approximately $7.5 trillion in the first quarter of the year, reaching an unprecedented level of over $324 trillion.
The International Institute of Finance (IIF) attributes this increase mainly to contributions from China, France, and Germany, while debt levels in Canada, the United Arab Emirates, and Turkey have experienced a decline.
The IIF noted in its Global Debt Monitor report that the sharp depreciation of the U.S. dollar against major trading partner currencies has contributed to the increased value of debt in dollar terms.
However, the rise in the first quarter was over four times the average quarterly increase of $1.7 trillion observed since the end of 2022.
The global debt-to-GDP ratio has seen a gradual decline, currently standing at just over 325 percent.
In contrast, the ratio for emerging markets has reached a record high of 245 percent.
Total debt in emerging markets exceeded $106 trillion in the first quarter, reflecting an increase of more than $3.5 trillion.
China alone accounted for more than $2 trillion of this rise, with the country's government debt-to-GDP ratio currently at 93 percent and projected to hit 100 percent by year-end.
Emerging markets excluding China also recorded unprecedented nominal debt values, with Brazil, India, and Poland experiencing the largest increases in their dollar-denominated debt.
Nevertheless, the IIF's data indicates that the debt-to-GDP ratio for these emerging markets has fallen to below 180 percent, roughly 15 percentage points lower than its all-time peak.
Emerging markets are bracing for a record $7 trillion in bond and loan maturities over the next two years, with advanced economies facing around $19 trillion in similar obligations.
The recent depreciation of the dollar has mitigated the impact of shocks for developing economies, reducing the effects of market volatility stemming from the trade wars initiated by the former U.S. administration under President Donald Trump.
The IIF remarked that prolonged policy uncertainty may necessitate more flexible fiscal policies, particularly in countries with strong trade ties to the United States.
Concerns have also been raised regarding the levels of U.S. debt and their impact on U.S. Treasury yields, stemming from substantial financing needs attributed to tax cuts.
The IIF indicated that the significant increase in the supply of U.S. Treasury bonds could exert pressure that raises yields, substantially increasing the government's interest expenses.
Under such circumstances, inflation risks may also rise.
The Trump administration views tariffs as a means to address budgetary gaps resulting from anticipated tax cuts.
However, uncertainties surrounding trade policy and disruptions in its implementation have hampered corporate spending and affected U.S. economic growth.
The report suggests that global tariffs, currently set at 10 percent, could potentially lead to reduced government revenues if they spark retaliatory measures from other nations.
The International Institute of Finance (IIF) attributes this increase mainly to contributions from China, France, and Germany, while debt levels in Canada, the United Arab Emirates, and Turkey have experienced a decline.
The IIF noted in its Global Debt Monitor report that the sharp depreciation of the U.S. dollar against major trading partner currencies has contributed to the increased value of debt in dollar terms.
However, the rise in the first quarter was over four times the average quarterly increase of $1.7 trillion observed since the end of 2022.
The global debt-to-GDP ratio has seen a gradual decline, currently standing at just over 325 percent.
In contrast, the ratio for emerging markets has reached a record high of 245 percent.
Total debt in emerging markets exceeded $106 trillion in the first quarter, reflecting an increase of more than $3.5 trillion.
China alone accounted for more than $2 trillion of this rise, with the country's government debt-to-GDP ratio currently at 93 percent and projected to hit 100 percent by year-end.
Emerging markets excluding China also recorded unprecedented nominal debt values, with Brazil, India, and Poland experiencing the largest increases in their dollar-denominated debt.
Nevertheless, the IIF's data indicates that the debt-to-GDP ratio for these emerging markets has fallen to below 180 percent, roughly 15 percentage points lower than its all-time peak.
Emerging markets are bracing for a record $7 trillion in bond and loan maturities over the next two years, with advanced economies facing around $19 trillion in similar obligations.
The recent depreciation of the dollar has mitigated the impact of shocks for developing economies, reducing the effects of market volatility stemming from the trade wars initiated by the former U.S. administration under President Donald Trump.
The IIF remarked that prolonged policy uncertainty may necessitate more flexible fiscal policies, particularly in countries with strong trade ties to the United States.
Concerns have also been raised regarding the levels of U.S. debt and their impact on U.S. Treasury yields, stemming from substantial financing needs attributed to tax cuts.
The IIF indicated that the significant increase in the supply of U.S. Treasury bonds could exert pressure that raises yields, substantially increasing the government's interest expenses.
Under such circumstances, inflation risks may also rise.
The Trump administration views tariffs as a means to address budgetary gaps resulting from anticipated tax cuts.
However, uncertainties surrounding trade policy and disruptions in its implementation have hampered corporate spending and affected U.S. economic growth.
The report suggests that global tariffs, currently set at 10 percent, could potentially lead to reduced government revenues if they spark retaliatory measures from other nations.
Translation:
Translated by AI
