[NEWS] THE GLOBAL DEBT BURDEN REMAINS AT A HIGH LEVEL - OTIS LAWYERS

The Global Debt Database indicates that although global debt recorded a significant decline in 2022, it still remains at a high level.

According to the latest update of the Global Debt Database, the global debt burden has decreased for the second consecutive year, although it still remains above pre-pandemic levels. The total debt was at 238% of global GDP last year, which is 9 percentage points higher than in 2019.

According to the International Monetary Fund (IMF), financial deficits have led to a sharp increase in public debt, as many governments have increased spending to spur growth and cope with the surge in food and energy prices even as they phase out pandemic-related financial support.

As a result, public debt has only decreased by 8 percentage points of global GDP over the past two years, offsetting only about half of the pandemic-related increase. In contrast, private debt, including household and non-financial corporate debt, has decreased at a faster pace, corresponding to 12 percentage points of global GDP. However, the decrease is not sufficient to offset the pandemic-induced increase.

The IMF states, "Prior to the pandemic, the global debt-to-GDP ratio had been increasing for several decades. Global public debt has tripled since the mid-1970s, reaching 92% of GDP (over $91 trillion) by the end of 2022. Private debt has also tripled to 146% of GDP (nearly $144 trillion), but over a longer period from 1960 to 2022."

The world has entered a period of high debt for the past three years, but debt could rise again in the medium term, and the IMF has called on governments to implement strategies to minimize debt risks - both in public, household, and non-financial corporate debt.

According to the IMF, the recovery of real GDP growth is fading. Inflation is projected to stabilize at a low level in the medium term. If global debt continues to trend upward in the future, the debt spiral since the pandemic may resemble a temporary detour from the long-term upward trend.

Debt in low-income developing countries has also increased significantly over the past two decades, albeit from initially lower levels. Even though their debt, especially private debt, remains relatively moderate compared to advanced and emerging economies, the pace of increase since the global financial crisis has posed challenges. More than half of low-income developing countries face risks of high debt, and about one-fifth of emerging markets have difficulties with government bond trading.

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