KUALA LUMPUR, May 17 — The total global debt rose a record US$24 trillion in 2020, pushing global leverage up a staggering 34 percentage points to a new high of 366 per cent of gross domestic product (GDP).
This was especially in emerging markets and Southern Europe as third and fourth waves of the Covid-19 pandemic were swelling, domestic demand was anaemic, and jobs as, well as incomes, have suffered sustained blows, according to Moody’s Analytics.
Though governments led the borrowing spree, it said corporate, household and financial sector debt rose as well, posing distinct risks to the global recovery.
“Despite improved growth prospects in the US and China, elevated debt burdens across the globe heighten the risks to growth and financial stability,” it said in a note today.
On global government debt, Moody’s Analytics said the debt rose by US$12.2 trillion in 2020, the largest increase on record and accounting for more than half of the increase in total global debt.
“As a share of global GDP, government debt broke into triple digits, reaching a record 105 per cent of global economic output.
“The pandemic-induced increase in leverage spans advanced and emerging markets alike and comes on the heels of rising government debt in most global regions in the five years prior to the pandemic,” it said.
It said the Moody’s Analytics measure of fiscal space based on projections of the government’s borrowing rate, primary balance, and nominal output growth showed a broad deterioration in most countries as debt levels surged in the wake of the pandemic.
“The sweeping rise in government debt amplifies these risks and is cause for caution in most countries across the globe,” it said.
However, it noted that there were several economies in which high and rising debt loads merit special attention, topping the list were the US and China.
Meanwhile, the debt-saddled Japan saw a smaller increase in its debt burden than most other countries in the Asia-Pacific region.
The global corporate debt rose by US$5.5 trillion last year, pushing the global tally of corporate debt to a record US$80.6 trillion and causing the ratio to GDP to surpass 100 per cent for the first time, it said.
“Though firms in Europe and Asia made some headway in reducing debt burdens in the five years prior to the pandemic, debt burdens rose in 2020 across global regions, the consequence of increased borrowing in North America, Europe and Asia, and sharp decline in output in Latin America, the Middle East, and Africa,” it said.
As for household debt, it surged US$2.5 trillion in 2020, the largest increase since the mid-2000s housing boom in the US and parts of Europe.
Moody’s Analytics said the rise brought total global household debt to a record US$51 trillion, as a share of global GDP, household debt also reached a new high of 64 per cent with supercharged property markets were the driving force in most global regions.
“In the Asia-Pacific region, China, Hong Kong, South Korea and Australia stand out despite some cooling in property prices in the run-up to the pandemic, as well as Vietnam, where household debt experienced a longer rise in conjunction with rapid growth in jobs and incomes,” it said.
Malaysia household debts stood at US$243.5 billion, 75.3 per cent of the global GDP.
“Global financial sector debt rose by US$3.9 trillion in 2021, the second-largest increase of the past 10 years, pushing financial debt up to 86 per cent of global GDP,” it added.