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The Institute of International Finance has said the following: “At close to $305 trillion, global debt is now $45 trillion higher than its pre-pandemic level and is expected to continue increasing rapidly.”
The finance industry body said the combination of such high debt levels and rising interest rates has driven up the cost of servicing that debt, triggering concerns about leverage in the financial system.
Central banks around the world have been hiking interest rates for over a year in a bid to rein in sky-high inflation.
“With financial conditions at their most restrictive levels since the 2008-09 financial crisis, a credit crunch would prompt higher default rates and result in more ‘zombie firms’ — already approaching an estimated 14% of U.S.-listed firms,” the Institute of International Finance said in its quarterly Global Debt Monitor report.
“If this trend continues, it will have significant implications for international debt markets, particularly if interest rates remain higher for longer,” the report noted.
Total debt in emerging markets hit a new record high of more than $100 trillion, around 250% of GDP, up from $75 trillion in 2019. China, Mexico, Brazil, India and Turkey were the largest upward contributors.
In developed markets, Japan, the U.S., France and the U.K. posted the sharpest increases over the quarter.
Global debt nears record highs as rate hikes trigger ‘crisis of adaptation,’ top trade body says (CNBC, 5-18-23)
Global Debt Monitor Report (The Institute of International Finance, 5-17-23)