Debt is difficult to pay – Kommersant
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The total world debt, according to experts from the Institute of International Finance (IIF), in the first quarter of 2023 increased by $8.3 trillion and amounted to $304.9 trillion (taking into account the debt of households, non-financial corporations, governments and the financial sector) – this is the maximum since the first quarter of 2022, when the figure reached a record $305 trillion. As follows from the organization’s quarterly review (Global Debt Monitor), the ratio of global debt to world GDP remains at about 335% after a maximum of 360% recorded in 2021. More sharply in the first quarter was the growth of the debt of developed countries, which was facilitated by the US, Japan, France and the UK. The debt of developing countries in January-March for the first time exceeded $ 100 trillion (about 250% of their total GDP), and an increase in the debt burden was recorded in 75% of them, calculated in the IIF. China, India, Turkey, Mexico and Brazil made the most significant contribution to the debt growth.
According to IIF estimates, global debt now exceeds pre-pandemic levels by $45 trillion and, most likely, will continue to grow quite rapidly: fears related to shocks in the US and Swiss banking sectors (for more details, see Kommersant on March 13) do not actually affect government borrowing, as the need for funding still remains. At the same time, in the medium term, borrowers’ creditworthiness is expected to be affected by rising spending on health care, national defense (due to rising political tensions), as well as the ongoing fight against climate change. This could lead to really serious consequences if interest rates “remain high for a long time.”
As follows from the report of the organization, adapting to the tightening of monetary policy is difficult for the world’s economies: high levels of debt, combined with the continued increase in rates, leads to an increase in debt servicing costs, which causes concern among analysts. Among the possible risks, the IIF cites a negative impact on small businesses, as well as an increase in the number of “zombie companies” that cannot service debt obligations from their profits. Now experts refer to such about 14% of all registered in the United States.
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