In 2020 global debt rose to $226 trillion, the highest annual debt surge since World War II, as the world economies were fighting the global health crisis and a deep recession, said the International Monetary Fund.
According to the latest update of the IMF’s Global Debt Database, global debt increased by 28 percentage points to 256 percent of GDP last year, a level of significance that the policymakers around the world must consider as they seek to bolster their economies from the Covid-19 induced slowdown while tackling new variants such as Omicron.
In Advanced economies, public debt surged from around 70 percent of GDP, in 2007, to 124 percent of GDP, in 2020, whereas Private debt rose at a moderate speed, from 164 to 178 percent of GDP in the same period.
The global public debt ratio spiked to a record 99 percent of GDP, with the loans taken by governments accounting for slightly more than half of last year’s overall surge; at the same time, household debt also reached new highs, the IMF said.
“The large increase in debt was justified by the need to protect people’s lives, preserve jobs and avoid a wave of bankruptcies. If governments had not taken action, the social and economic consequences would have been devastating,” IMF officials wrote in a blog.
“But the debt surge amplifies vulnerabilities, especially as financing conditions tighten. High debt levels constrain, in most cases, the ability of governments to support the recovery and the capacity of the private sector to invest in the medium term.”
Public debt has reached its highest share since the mid-1960s, accounting for 40 percent of total global debt.
Advanced economies and China were responsible for more than 90 percent of the $28 trillion debt rise in 2020. Because of low-interest rates, central banks decisions, and well-developed financial markets, these countries could expand their public and private debt during the pandemic.
Emerging markets (excluding China) and low-income countries did not contribute much to the rise in global debt, as they borrowed around $1–$1.2 trillion each, mainly due to higher public debt.