UNITED STATES (OBSERVATORY) – Last June it was reported that, according to the Institute of International Finance, which is known for its periodic reports summarizing statistics on global leverage at the end of 2016, during the so-called “coordinated growth”, the volume of the world debt broke a new record high of $ 217 trillion, which amounted to more than 327% of world GDP and was $ 50 trillion higher than the level noted over the past decade.
Six months later, on January 4, 2018, the IIF published another analysis of the situation around the global debt, which said that the global debt rose to a record $ 233 trillion at the end of the third quarter of 2017.
At the same time, $ 63 trillion belongs to the public sector, $ 58 trillion – to financial sector, $ 68 trillion – to non-financial sector, $ 44 trillion – to household sector.
In general, for 9 months the debt grew by $ 16 trillion.
Now, according to the latest quarterly data, the IIF found that in the last quarter the global debt grew by another $ 4 trillion, to a record $ 237 trillion in the fourth quarter of 2017, and was more than $ 70 trillion higher than 10 years ago, by about $ 20 trillion higher than in 2017.
The IIF report, which also includes data from the IMF and the BIS, found that the share of global debt remains well above 300% of world GDP, while the debt / GDP ratio in mature markets now stands at 382%. This number was slightly lower than the last levels, as the increase in GDP growth in mature markets helped to reduce the debt-to-GDP ratio.
However, this was offset by the growth of debt in emerging markets, where the total debt / GDP ratio now far exceeds 200%.
The good news is that on a consolidated basis, the global debt / GDP ratio falls for the fifth consecutive quarter, as global growth accelerated.
Now the coefficient is about 317.8%, which is 4% lower than at the last high in Q43 2016. Undoubtedly, even a modest decline in GDP growth rates, not to mention the reduction, will immediately send this coefficient to new highs.
So, who is to blame for this unprecedented increase in debt? Of course, central banks.
“Low global rates continue to support unprecedented levels of debt,” officials from the IIF said.
As noted in the report, in mature markets, household debt as a percentage of GDP reached record highs in Belgium, Canada, France, Luxembourg, Norway, Sweden and Switzerland. This, as Bloomberg notes, is a worrying signal, given that interest rates are starting to rise around the world. Ireland and Italy are the only major countries in which the share of households as a percentage of GDP is below 50%.
Representatives of the IIF also stressed that the weak US dollar “hid the long-term problems of debt sustainability, especially in emerging markets.” The reduction in the debt / GDP ratio began mainly in developed markets such as the US and Western Europe, but then it became a common trend in 36 of the 49 countries, according to a survey showing a decline in the debt-to-GDP ratio.
With regard to emerging market countries, in South Korea, the ratio of household debt to GDP approaches parity at 94.6%.
The report also found that the US national debt is 99% of GDP. Given that the US expects a record $ 1 trillion budget deficit by 2020, according to the latest CBO forecast, the debt / GDP ratio in the US will overcome 100% in the next few months.