Global debt is now approaching $277 trillion almost a record

Global debt is nearing a record at $244 trillion, an amount that is three times the total amount of the global economy a new analysis by the Institute of International Finance (IIF) finds.

Global Debt

The global debt to GDP ratio is more than 318 percent as of the third quarter of 2018 even though there was a stronger rate of economic growth the Washington-based Institute of International Finance claimed in a report on January 16. This is not quite a record as in the second quarter of 2016 the rate was 320 percent. As interest rates are beginning to rise globally the International Monetary Fund (IMF) is warning governments that countries should reign in their soaring level of debts and begin to build buffers against risks in the future.

A Reuters article reports: "Debt reached $244.2 trillion, compared to $235.1 trillion a year earlier and $242.5 trillion in the second quarter, the data showed. The nominal record high stands at $247.7 trillion in the first quarter of 2018."

Economist Sonja Gibbs of IIF notes that although debt has helped economic growth but warns of negative effects if there is slower economic growth and servicing debts becomes more difficult: “Debt has fueled a good deal of economic growth... Higher borrowing is widespread, though countries borrow differently. Government debt, for example, is highest among mature economies, such as the United States and France. By contrast, business borrowing has been more common in “emerging-markets"..The risk is not [an economic] blowout but a slow slog — slower growth,..As debt service gets bigger, it takes away from what you can do with more borrowing. It diverts from more productive uses.”

Key Aspects of the Debt

Total government debt was more than $65 trillion last year. This was way up from just ten years ago. The debt rose faster in mature markets.

Non-financial corporate debt climbed to over $72 trillion in 2018. This is near a new all-time high being 92 percent of GDP.

Financial sector debt grew to about $60 trillion, up 10 percent from a decade ago.

Household indebtedness rose by more than 30 percent to a total of $46 trillion. The hike was helped by strong growth in household spending in emerging markets such as China. But a number of different countries including India, Mexico, South Korea, Malaysia and several others recorded gains from 2016 of over 20 percent.

Previously published in Digital Journal