It was referring to total debt incurred by the household, government, financial and non-financial corporate sectors.
However, China which has accounted for the lion’s share of new debt in emerging markets, saw the pace of debt accumulation slow; debt rose by two percentage points last year to 294 percent of GDP, compared to an average annual increase of 17 percentage points in the 2012-2016 period.
The IIF warned however, of “heavy emerging market redemptions” noting that over $1.5 trillion of bonds and syndicated loans would be maturing through end-2018. China, Russia, Korea and Brazil had heavy dollar-debt repayment schedule this year, it added.
— Alastair Williamson (@StockBoardAsset) January 5, 2018
The world economy is recovering but it is still panic stations for central banks. For them, global debt is like the sword of Damocles — an ever-present danger. It stands at about 330 per cent of annual economic output, up from 225 per cent in 2008, according to the Bank for International Settlements. After the 2008-09 financial crisis, the hope was that a combination of economic recovery, inflation and austerity would shrink the debt mountain. This, though, was too optimistic. Growth has been below par, inflation subdued and austerity self-defeating. While governments backslide on fiscal and industrial reform, the very toxin that sparked the crisis is relied on to reboot economies in the Americas and Europe. Its hidden dangers — complacency and financial excess — were highlighted again last month by the International Monetary Fund. No one knows all the cracks into which excess liquidity has seeped — or what risks are being stored up. Debt means consumption brought forward while low rates mean the survival of zombie borrowers and companies.
The good news is that “robust economic growth meant debt-to-GDP ratios were declining.” The bad news is that nearly everybody is sitting on mountains of debt which needs to be refinanced regularly — and rates are going up.