The economic and financial uncertainty, exacerbated by the effects of war in Ukraine, is making its terrible weight felt globally. The alarm comes fromInstitute of International Finance, in its latest report on “The search for sustainability”. The crisis triggered by high interest rates which has affected almost all countries in the world has pushed global debt to record levels.
The IFF expresses concern because “the public debt has reached alarming levels in many states and the global financial architecture is not prepared to manage the risks associated with tensions in domestic markets.” Here are the (monstrous) numbers and the reasons for the crisis.
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How much global debt is worth: record figures
According to the data, in the first half of 2023 world debt has grown by 10 thousand billion dollars, reaching an overall value that is nothing short of dizzying: 307 thousand billion. The billion dollar increase compared to ten years ago is as much as 100 thousand. The residual balance of public and private liabilities at a global level therefore increases the already substantial fears of the most “prominent” economies on Earth. The big picture of interest rates soared to record levels (Speaking of which, Is it better to get a mortgage or rent now?), as mentioned, also caused the debt figure to rise accordingly. In a nutshell, it should be said: family debt appears to be decreasing in the developed and rich First World, while it is growing in the group of emerging and poor countries.
The relationship between debt and global GDP it now stands at around 336%up 2 points from 334% in the fourth quarter of 2022. Experts highlighted a significant trend reversal: after seven consecutive quarters (21 months) of declinebeneficiaries of the post-pandemic climate, the trajectory was uphill again in the first half of 2023.
The change in the debt/GDP ratio is attributable to theinflation trend and its value, according to the IFF, will exceed 337% by 2024. With the price and wage crises destined to worsen, as already observed with the abnormal growth of rates in Europe and the USA. The latter has placed much of the burden of bank credit on the shoulders of families and businesses.
Which are the most indebted countries in the world
There are obviously nations that, more than others, have contributed decisively to the rush of total indebtedness. At the top of this less than virtuous ranking we find France, United States, Japan and United Kingdombut also China, India and Brazil. The first four alone are responsible for more than 80% of the debt accumulation in the first half of 2023, while the second group showed the strongest growth among the markets classified as “emerging”. In these cases there has been a marked increase in bond issues in euros to protect themselves from competition from the dollar.
The Institute of International Finance report also notes how Saudi Arabia, Poland and Türkiye have been major borrowers from international markets, once again revealing their foreign financing needs. The debt/GDP ratio remains at levels higher than the pre-Covid period even in countries such as South Korea and Thailand, while in the most developed countries it fell to the lowest value in the last two decades. The experts conclude that “in rich markets Consumer debt is still at manageable levels and this could allow further increases by central banks.” Renewing the fears of millions of savers.