The Economy

Global Debt-to-GDP Hits Record 322% in Q3

The Institute of International Finance sees debt growth accelerating this year due to low interest rates and "loose financial conditions."
Matthew HellerJanuary 13, 2020

The global debt-to-GDP ratio hit a new all-time high in the third quarter of 2019, raising concerns about the financing of infrastructure projects.

The Institute of International Finance reported Monday that debt-to-GDP rose to 322%, with total debt reaching close to $253 trillion and total debt across the household, government, financial and non-financial corporate sectors surging by some $9 trillion in the first three quarters of 2019 .

Additionally, the IIF sees debt growth accelerating this year.

“Spurred by low interest rates and loose financial conditions, we estimate that total global debt will exceed $257 trillion in Q1 2020, driven mainly by non-financial sector debt (now approaching $200 trillion),” it said.

The first-quarter estimate works out at around $32,500 in debt for each of the 7.7 billion people on planet and more than 3.2 times the world’s annual economic output, according to Reuters.

The IIF numbers amplify the concerns of the World Bank, which last week identified “the largest, fastest, and most broad-based accumulation of debt since the 1970s” as a threat to global economic growth. In 2018, global debt climbed to a record high of 230% of GDP.

According to the IIF, mature markets total debt now tops $180 trillion, or 383% of these countries’ combined GDP, while in emerging markets it is double what it was in 2010 at $72 trillion, driven mainly by a $20 trillion surge in corporate debt.

“China’s debt is fast approaching 310% of its GDP — one of the highest in emerging markets — and following a marked slowdown in 2017-18 when Beijing made a big push for deleveraging, there has been a pick-up again in corporate debt,” Reuters noted.

The IIF noted that the “ambitious SDG [sustainable development goal] agenda requires the quick mobilization of international and domestic resources to finance some $42 trillion of SDG-related infrastructure investments by 2030.”

“While this represents a tremendous opportunity for investors, countries with limited borrowing capacity could face severe challenges in meeting development finance needs,” the institute warned.