Global debt nears new record, populism could push it even higher: IIF – World ReadingS


LONDON: Global debt reached a record $307.4 trillion in the third quarter, with the debt-to-output ratio in emerging markets reaching an all-time high, the Institute of International Finance said on Thursday.

The financial services trade group has predicted that global debt will reach $310 trillion by the end of the year; That represents an increase of more than 25 percent over five years, and he warned that a shift towards political populism could push debts higher next year.

“Looking ahead to 2024, a series of elections and ongoing geopolitical frictions are raising concerns about rising government borrowing and fiscal discipline, including in India, South Africa, Pakistan and the United States,” the statement said.

“If the upcoming elections lead to populist policies aimed at containing social tensions, the result could still be more government borrowing and fewer fiscal restrictions.” Two-thirds of the debt increase last quarter came from developed markets, led by the US, Japan, France and the UK. Emerging markets China, India, Brazil and Mexico also recorded sharp increases.

While global debt/GDP ratios remained stable, they exceeded 255% in emerging markets (32 points higher than the same period five years ago), driven by Russia, China, Saudi Arabia and Malaysia.

Public debt showed the largest increase in the third quarter, the IIF said, adding that budget deficits remained well above pre-pandemic levels in many countries.

But it warned that the debt burden of households and companies was still rising in major economies, including China and the US, and this was reflected in everything from elections to the transition to clean energy.

“With firms’ borrowing appetite still at multi-year lows due to tightening funding conditions and increasing geoeconomic fragmentation, prospects for climate finance appear increasingly at risk in recent quarters, as evidenced by the significant slowdown in ESG debt issuance,” the report said.

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