Daily Management Review

Experts: Debts are growing faster than economy


According to the results of the third quarter of 2019, the total debt burden of households, governments, financial and non-financial corporations in the world grew to a record high of 322% of global GDP, experts at the Washington Institute of International Finance (IIF) calculated.

In absolute terms, debt increased to $ 253 trillion: developed countries account for $ 180 trillion (383% of their total GDP), and developing countries account for $ 72 trillion (223%). The IIF expects that in 2020 the growth of the debt burden will accelerate and will exceed $ 257 trillion already in the first quarter. This will be facilitated by the soft conditions of the monetary policy of leading central banks. Over the year (the fourth quarter of 2018 — the third quarter of 2019), debts grew more noticeably than GDP (3.9% versus 2.6%).

Since the beginning of 2019, total debt for nine months has increased by almost $ 9 trillion (by $ 3.5 trillion - at the expense of governments, by $ 3 trillion - in the non-financial sector, households increased debt by $ 1.7 trillion, and the financial sector - by $ 800 billion). In relation to GDP, the debt of the non-financial sector amounted to 92.5% of GDP, governments - 88.3%, households - 60.2%, financial sector - 81.4%.

The debt of developing countries has nearly doubled since 2010. First of all, it happened due to an increase in the load on corporations (an increase of $ 20 trillion to $ 31 trillion). At the same time, the foreign currency load, although it has grown by $ 4 trillion over ten years, remains at the level of only $ 8.3 trillion (about 12% of the total debt). One of the leaders of debt growth was China, where it is approaching 310% of GDP. After the campaign to reduce lending in 2017–2018 last year, the burden in China increased again (corporate debt to GDP grew from 154.4% to 156.7%, governments - from 49% to 53.6%, households - from 51, 9% to 55.4%, of the financial sector - from 42.1% to 42.8%).

The IIF indicates that in the largest developing countries (the BRICS group, Indonesia, Malaysia, Turkey) about 60% of the debt of the non-financial sector falls on state corporations and companies with state participation (the lowest figure is 20% (Turkey); the highest is 85% (South Africa).

source: iif.com