The Institute of International Finance (IIF) said on Tuesday that global debt reached a new record high of about $300 trillion in the second quarter, although the debt-to-GDP ratio fell for the first time since the start of the recession as economic growth resumed.
Total debt, which includes government, family, business, and bank debt, climbed $4.8 trillion to $296 trillion at the end of June, up to $36 trillion from pre-pandemic levels after a modest dip in the first quarter.
“We estimate global debt to approach $300 trillion if borrowing continues at the current rate,” said Emre Tiftik, IIF’s director of sustainability studies.
The growth in debt levels was the most pronounced among developing markets, with total debt jumping $3.5 trillion from the previous three months to about $92 trillion in the second quarter.
The IIF reported a decrease in the global debt-to-GDP ratio for the first time since the outbreak of the coronavirus crisis, which is a positive sign for the debt outlook.
In the second quarter, debt as a percentage of GDP declined to roughly 353 percent, down from a peak of 362 percent in the first three months of this year. According to the IIF, 51 of the 61 nations it studied had their debt-to-GDP ratios fall, owing to a significant recovery in economic activity.
However, it cautioned that the recovery has not been robust enough in many cases to bring debt ratios down below pre-pandemic levels.
Only five nations, according to the IIF, have overall debt-to-GDP ratios that are lower than pre-pandemic levels: Mexico, Argentina, Denmark, Ireland, and Lebanon.
China’s debt levels have risen faster than those of other countries, while emerging-market debt excluding China hit a new high of $36 trillion in the second quarter, primarily due to increased government borrowing.
After a minor reduction in the first quarter, debt in developed economies, particularly the eurozone, climbed again in the second quarter, according to the IIF.
Although household debt climbed at a record rate, debt creation in the United States was the slowest since the start of the crisis, at roughly $490 billion.
In the first half of this year, global household debt increased by $1.5 trillion to $55 trillion. In the first half of the year, roughly a third of the nations studied by the IIF experienced an increase in household debt, according to the IIF.
“In practically every major country in the globe, rising housing prices have accompanied increased household debt,” said Tiftik of the IIF. According to the IIF, total sustainable debt issuance has topped $800 billion this year, with global issuance expected to reach $1.2 trillion in 202
