Despite the nominal reduction, in developed economies debt rose to 122% of GDP compared to 73% before the 2008 crisis
< p>MARC JONES/REUTERS
A rebound in global growth and a post-pandemic resurgence of inflation last year meant the global economy saw its first annual contraction of debt since 2015, according to research closely watched by a range of actors and agencies. The report of the Institute of International Finance (IIF) published yesterday, estimates that the global debt has decreased by about 4 trillion. dollars, bringing it back below the 300 trillion mark. dollars, surpassing 2021. With borrowing costs rising, particularly for emerging markets, the reduction came entirely from the richest countries, which saw their total debt fall by about $6 trillion. dollars to 200 trillion dollars. In contrast, the amount of developing global debt reached a new record high of $98 trillion. dollars.
Again, however, the improvement came from developed markets, which had an overall decline of 20 percentage points to 390% of GDP. The debt ratio of emerging markets increased by 2 percentage points to 250% of GDP, mainly due to China and Singapore. Breaking down the numbers further, the Institute for International Finance estimated that emerging markets' public debt-to-GDP ratio rose to nearly 65% in 2022 from just under 64% in 2021. “The external public debt burden of many developing countries has worsened due to sharp losses in the national currencies' exchange rate (in 2022) against the dollar,” the IIF said. This situation had driven demand for emerging market national currency bonds to record lows.
JP Morgan had a different take on the global debt situation. In an analysis published yesterday, he pointed out that despite a modest reduction in developed market debt last year, the rise since the global financial crisis fifteen years ago and since has been anything but small. In fact, it estimated that advanced countries' public sector debt as a share of GDP has risen to 122% from 73% just before the crisis and over 30 percentage points of GDP in 13 of the 21 major economies – and over 45% in nine of them. What makes the nearly 50% jump all the more remarkable, finally, is that debt had grown by just 40 percentage points in the 40 years leading up to the financial crisis – and during that time there were also serious shocks, including stagflation in the 1990s. 1970.