Global debt hits record $ 226 trillion amid COVID-19 pandemic, biggest year-over-year debt increase since World War II • Today News Africa
Global debt hit a record high of $ 226 trillion in 2020 amid the economic crisis linked to the COVID-19 pandemic, the biggest one-year debt increase since World War II, latest data shows published Wednesday by the International Monetary Fund (IMF).
Advanced economies and China accounted for over 90% of the $ 28 trillion debt increase in 2020.
“These countries were able to increase their public and private debt during the pandemic, thanks to low interest rates, actions of central banks (including large purchases of public debt) and well-developed financial markets. But most developing economies are on the other side of the financial divide, facing limited access to finance and often higher borrowing rates, ”IMF economists wrote. Vitor Gaspar, Paulo Medas, and Roberto Perrelli in a joint column published Wednesday.
The 2021 update of the IMF’s Global Debt Database shows that global debt increased by 28 percentage points to reach 256 percent of GDP in 2020.
The IMF’s Global Debt Database (GDD) is considered a single dataset covering the private and public debt of almost the entire world since the 1950s.
Government borrowing accounted for just over half of the increase, as the global public debt ratio climbed to a record high of 99% of GDP.
The share of public debt in global debt has reached new highs unprecedented for more than 50 years, reflecting a strong cumulative increase since the global financial crisis, while private debt increased by 10% in 2020, partly reflecting support from central banks and government.
However, the increase in debt has varied considerably from country to country, given the highly uneven ability of governments and central banks to support households and businesses during the pandemic and a deep economic recession.
Private debt of non-financial corporations and households has also reached new highs, the IMF said, noting that debt increases are particularly striking in advanced economies, where public debt has risen from around 70% of GDP. , in 2007, to 124% of GDP, in 2020. Private debt, on the other hand, grew at a more moderate pace, from 164 to 178% of GDP, during the same period.
In a column published Wednesday, IMF economists Vitor Gaspar, Paulo Medas and Roberto Perrelli wrote that “debt was already high at the start of the crisis, but now governments must navigate a world of public and private debt levels. record, new virus mutations and rising inflation.
They said: “Looking at the global trends, we see two distinct developments. Public debt now accounts for nearly 40% of total global debt, the highest share since the mid-1960s. The build-up of public debt since 2007 is largely attributable to the two major economic crises to which governments have suffered. faced, first the global financial crisis, then the COVID-19 pandemic.
“Advanced economies and China accounted for over 90% of the $ 28 trillion debt increase in 2020. These countries were able to increase their public and private debt during the pandemic, thanks to low interest rates , actions of central banks (including large purchases of public debt) and well-developed financial markets. But most developing economies are on the other side of the financial divide, facing limited access to finance and often higher borrowing rates.
“In advanced economies, budget deficits have skyrocketed as countries have seen their incomes plummet due to the recession and implemented sweeping tax measures as COVID-19 spreads. Public debt increased by 19 percentage points of GDP in 2020, an increase like that observed during the global financial crisis, over two years: 2008 and 2009. However, private debt jumped by 14 percentage points of GDP in 2020, almost twice as much. as during the global financial crisis, reflecting the different nature of the two crises.
“During the pandemic, governments and central banks supported new private sector borrowing to help protect lives and livelihoods. While during the global financial crisis, the challenge was to contain the damage caused by an excessively indebted private sector.
“Emerging markets and low-income developing countries faced much more stringent funding constraints, but with large disparities between countries. China alone accounted for 26% of the increase in global debt. Emerging markets (excluding China) and low-income countries accounted for a small share of the increase in global debt, around $ 1.2 trillion each, mainly due to higher public debt .
“Nonetheless, emerging markets and low-income countries are also facing high debt ratios due to the sharp decline in nominal GDP in 2020. Emerging market government debt has reached record levels, while in the low-income country, it has reached levels not seen since. in the early 2000s, when many benefited from debt relief initiatives.