Daily Management Review

Institute of International Finance: Global debt growth is slowing down


04/04/2019


The total debt load in the world in 2018 grew by less than 1.5% . Its peak was passed in the first quarter, after which the volume of liabilities began to decline, the Washington Institute of International Finance calculated. In the United States, however, the growth of debt has become the highest since 2007. The total amount of debt in China has also increased as the growth rate of households and governments has leveled its decline in companies.



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Amount of global debt in 2018 increased by $ 3.3 trillion, to $ 243 trillion, or up to 317% of world GDP, experts of the Institute of International Finance calculated. A year earlier, the increase in debt was noticeably large - plus $ 21 trillion. The entire increase in the figure for 2018 came in the first quarter: according to its results, the size of the debt was at a historic peak - $ 248 trillion. This was followed by a correction, including increase in borrowing rates against the background of tightening the monetary policy of the US Federal Reserve. Most of all, in 2018, household debt increased by $ 1 trillion (to $ 46.2 trillion). The governments and non-financial sector increased the load by $ 800 million (to $ 64.5 trillion and $ 72 trillion, respectively), the financial sector grew by $ 600 million (to $ 59.8 trillion).

In emerging markets, debt growth has slowed sharply and amounted to about $ 1 trillion, which is only a quarter of the average size of the increase in load observed in 2013–2017 (in relation to GDP, the indicator has not changed much, reaching 212% of GDP). Liabilities in foreign currency remained at the level of $ 5.3 trillion. However, due to the weakening of the national currency against the US dollar, servicing such a debt became more expensive.

Many international experts, including the IMF are concerned about China. There, the total size of the burden remained at 290% of GDP. The authorities' fight against shadow banking resulted in a reduction in the burden of the non-financial sector by 5 percentage points (pp), and now IIF estimates it at 157% of GDP. This figure is one of the largest in the world. The household and government load, by contrast, rose by almost 3 points, to 51.2% and 49.2% of GDP, respectively. 

In developed markets, the ratio of debt to GDP remained at 390%. In Japan, France and Australia, this figure increased, while Ireland, the Netherlands and Portugal decreased the load. In the United States, debt growth has been at its maximum since 2007 — plus $ 2.9 trillion, to $ 68 trillion. 40% of this increase was provided by the government, but the load grew slower than the economy, so the ratio to GDP fell to its lowest level since 2005 - to 326% of GDP. The authors separately indicate that the volume of household borrowing and the financial sector in the United States remains 20 and 45 pp below pre-crisis (74.8% and 78.2% of GDP). Corporate debt, however, is already close to this level (73 % of GDP), and the national debt by 30 pp exceeds it (100.2% of GDP) and will grow further as a result of the American tax reform and the increased volume of government spending.

source: iif.com






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