Global debt in the first half of the year grew to $307 trillion and reached 336% of global GDP

According to the Institute of International Finance, global debt continued to grow in the first half of the year, increasing by $10 trillion, and reached a new record of $307 trillion, which is already 336% of global GDP. The main increase in debt since the beginning of the year occurred against the backdrop of borrowing from large developed and developing countries – the USA, Japan, France, Great Britain, China, India and Brazil. Russia has also recorded an increase in debt in all major segments – government debt, corporate debt, debt of the financial sector and households.

Yesterday, the Institute of International Finance (IIF) published a report on the dynamics of global debt (government, corporate, financial and household) for the first half of 2023 (.pdf) It is reported that during this period it grew by $10 trillion and reached $307 trillion, which is a new absolute record. The IIF notes that just ten years ago, global debt was $100 trillion less.

Much of the growth this year (80% of total growth) was due to increased borrowing in large developed countries – the USA, Japan, Great Britain and France. The IIF also notes a noticeable increase in debt in the world’s leading emerging economies – China, India and Brazil.

The researchers emphasize that until the beginning of this year, the ratio of global debt to global GDP had declined for seven consecutive quarters. In the fourth quarter of 2022, it was 334%, but has now increased to 336%.

“The sudden rise in inflation was a major factor in the sharp decline in debt-to-GDP ratios, allowing governments and corporations in many countries to increase their debt obligations in local currencies,” the IIF report noted. “However, as pressure from rising prices and wages became weaken – although not yet reaching the target indicators – we expect that by the end of the year, global debt will already reach 337% of global GDP.

Russia also recorded an increase in debt in relation to GDP in all major segments: for households in relation to GDP it increased from 19.4% in the second quarter of last year to 22.5% in the second quarter of this year; corporate debt of the non-financial sector – from 67.4% to 78%; state – from 19.1% to 22.3%; financial sector – from 6.1% to 9.1%.

Regarding the consumer debt situation globally, the IIF said it remains “manageable”.

While in countries such as China, South Korea and Thailand, this debt-to-GDP ratio is still above pre-pandemic levels, in developed countries it has fallen to a record low in the last 20 years.

The IIF notes a more complex situation with external government debt in a number of developing countries. Already in the second half of 2022, the ratio of external public debt to GDP in these countries (except China) began to grow. The most active borrowers in foreign markets were Saudi Arabia, Poland and Türkiye.

As for domestic government debt, this year the volume of new borrowings has decreased by 20% compared to last year. “However, with interest costs in local currencies in developing countries now accounting for more than 80% of interest costs on total government debt, domestic government debt levels have reached alarming levels in many countries,” the IIF report said.

Evgeny Khvostik