Global debt surpassed $307 trillion in the third quarter, a record high, and is forecast to continue rising next year due to political turmoil.
The information was just announced by the Institute of International Finance (IIF) on November 16. This research organization estimates that global debt will reach 310,000 billion by the end of this year, up 25% compared to 5 years ago. They also warned that political upheavals could push this number higher next year.
Emre Tiftik, research director at the IIF, said there are more than 50 elections around the world next year, including in the US, India, South Africa, Turkey and Pakistan. "As politics become more polarized and tensions rise, upcoming elections could usher in a populist policy shift. This could lead to increased government spending and debt. Markets will be more volatile," he explained.
Tiftik warned that debt servicing would squeeze revenues globally, with debt in Pakistan and Egypt already at alarming levels. In the US, government interest payments are forecast to reach 15% of revenue by 2026, up from 10% now.
70% of the increase in debt last quarter came from developed countries, such as the US, Japan, France and the UK. Emerging countries such as China, India, Brazil and Mexico also recorded strong increases.
Although the global debt-to-GDP ratio is still around 333%, this figure in emerging countries has increased by 32% compared to 5 years ago, to the current 255%.
The IIF said public debt was the biggest growth category in the third quarter, with budget deficits still much higher in many countries than before the pandemic. The report also said the amount of public debt that is considered in default will reach $554 billion by the end of 2022, half of which is in bonds.
Household and corporate debt burdens are also rising in major economies, including the United States and China. However, the IIF report said corporate borrowing demand is at multi-year lows, due to a tightening financial environment and rising geopolitical risks.
Ha Thu (according to Reuters)
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