Daily Management Review

IIF: Global debt reached $ 217 trillion


06/30/2017


According to the Institute of International Finance (IIF), the growth of the world debt for the past year has slowed down: in the first quarter it grew by only $ 600 billion, at the same time making a record $ 217 trillion, which corresponds to 327% of world GDP. The growth of debt compared to last year in developing countries was $ 3 trillion, and China's debt was particularly remarkable by $ 2 trillion - grew.



pixabay
pixabay
The latest study prepared by the Institute of International Finance (IIF) shows that size of the world debt reached a record value of $ 217 trillion, thereby making it 327% of world GDP. Although, according to experts from the IIF, the growth in debt, especially in developed countries, slowed, in the first quarter of 2017, the world debt grew by $ 600 billion. At the same time the debt in developing countries increased by $ 3 billion, to more than $ 56 billion, which corresponds to 218% GDP of these countries. China's debt reached $ 32.7 trillion in the first quarter, which corresponds to 304% of the country's GDP, for a year the debt grew by $ 2 trillion. The debt of other developing countries during this period increased by $ 900 billion, to more than $ 23.6 trillion, including Brazil's debt increased by $ 600 billion, to $ 3.6 trillion, India - by $ 200 billion, to $ 2.9 trillion. The Eurozone’s debt, on the contrary, fell by $ 5.7 trillion, to $ 97.7 trillion. The debt of the US increased by $ 2 trillion and amounted to $ 63 trillion.

"The debt burden is distributed unevenly: some countries/sectors are reducing the debt, while the level is still very high in some of them. The increase in debt can hamper long-term growth and ultimately pose a risk to financial stability", the study said. In its calculations, IIF takes into account debts of both governments, companies and individual households. According to the forecasts of IIF, the era of supercheap loans, which lasted from the world financial crisis of 2008, is nearing its end. Carsten Brzeski, senior economist at ING Bank, says that the high level of debt indicates that the debt crisis has not yet been finalized either in the US or in the eurozone, which is confirmed by the growth of debt in Asia. At the same time, Mr. Brzeski does not believe that this is a harbinger of a new financial crisis.

Earlier, the World Bank published a forecast for the growth of the world economy. In general, a restrained recovery of economic growth is expected in 2017 - obstacles to increasing business activity in the countries exporting raw materials (their growth will accelerate from 0.3% to 2.3% on average) are gradually disappearing, and domestic demand is increasing in the importing countries, the new half-year forecast of the World Bank says. In 2016, global growth was a record low of 2.3%, this year it is expected to grow by 2.7%. At the same time, however, a high degree of uncertainty remains, rates may be either higher or lower than this indicator (in the range of 2% to 3.2%).

Meanwhile, the acceleration of growth in the US will have global consequences, the World Bank expects. The country's GDP will grow by 2.2% in 2017 against 1.6% in 2016 (the low figure for this year is explained by weak exports and a reduction in private investments). Possible measures of the new US administration to stimulate growth (reduction of taxes, state investment in infrastructure, etc.) have not yet been included in the basic forecast, the bank specified, and said their full implementation can accelerate growth to 2.2-2.5% in 2017 and up to 2.5-2.9% in 2018. The slowdown in productivity growth, which is seen as one of the key problems, can be explained, in particular, by a shift in employment towards the service sector, where labor productivity is low.

In the euro area, the growth rate will remain weak (1.5%) amid a low volume of investments on the periphery of the monetary union, the risks of the deterioration of the situation in the banking sector, and also due to the consequences of Brexit. In China, the growth in consumption will remain significant (it is supported, in particular, by lending, which is still ahead of the growth rate of GDP growth), while investment will continue to slow. As a result, China's GDP growth will be 6.5% - slightly less than in 2016 (6.7% is expected).

source: reuters.com
 






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