World debt has recovered from the pandemic

The recovery of national economies and rising inflation led to a record reduction in the relative debt burden in the world at the end of 2021: as a percentage of GDP, the total debt of governments and the private sector decreased by ten percentage points, to 247% of global GDP, according to the final data of the International Monetary Fund ( IMF). This year, the decrease in the load continued, but already due to a decrease in the activity of borrowers: the terms of borrowing for them worsened along with the increase in rates by the leading central banks.

At the end of 2021, global public and private debt fell to a level of 247% of GDP, dropping by ten percentage points at once compared to 2020, when the increase was 29 percentage points, the IMF calculated. The decline was primarily due to the recovery growth of the economies and the acceleration of inflation. At the same time, total debt at the end of 2021 was 19 percentage points higher than before the pandemic, amounting to $235 trillion in absolute terms.

The level of world public debt has decreased from 100% to 96% of GDP. The debt of the non-financial private sector — from 160% to 153% of GDP, while the burden on the corporate sector decreased more significantly than that of households — by 4.2 p.p. vs. 1.5 p.p.

In developed countries, the total debt burden for 2021 decreased by 10 percentage points, to 292% of GDP, which offset about a third of its growth in 2020. Public debt decreased by 5 percentage points to 119.5%. Private sector debt – from 180% to 175%, including corporate debt decreased by 4 p.p., household debt – by 2 p.p. US government debt fell to 128% of GDP last year against 134.5% in 2020 -m and 108.8% in 2019. The highest load remained in Japan (262.5% of GDP against 236.3% a year earlier), in the euro area, public debt grew more moderately – after increasing in 2020 from 86% to 99% of GDP, last year it decreased to 97, 5% of GDP.

The total debt burden of developing countries decreased by 7 p.p., to 192% of GDP, due to the reduction of private sector debt to 130% of GDP (also minus 7 p.p.), public debt remained at the same level, which made it possible to level the 60% load growth in 2020. Excluding China, the total burden of developing countries amounted to 130% of GDP.

Note that before the pandemic, the burden of households in developed countries was consistently declining after the crisis of 2008-2009 (from 81% to 73% of GDP), while corporate debt remained stable (at the end of 2019 it amounted to 92% of GDP). In developing countries, on the other hand, during this period both the workload of households and corporations increased.

In 2022, the level of global debt continued to decline: according to the Institute of International Finance, which considers the indicator somewhat differently, in the third quarter it fell by $6.4 trillion, to $290 trillion, in relation to GDP – to 343% (from the peak in the first quarter of $306 trillion, the decline was more than $15 trillion, the estimate is given taking into account the debt of financial institutions). The decrease in the activity of borrowers was caused by the tightening of financing conditions due to the increase in rates by the leading central banks. The decline was more pronounced in developed markets – in Japan, Great Britain, France, Canada. The US was the only country whose debt load increased in the third quarter (this was facilitated by the strengthening of the dollar and risk phobia in the markets).

In developing countries, in 2022, debt to GDP, by contrast, rose to 254% of GDP. The debt of Russian households in the third quarter decreased over the year from 22% to 21.2% of GDP, the non-financial sector – from 83.1% to 77.4%, public debt – from 19.3% to 16.1%, and the debt of the financial sector — from 9.7% to 6.2%.

Tatyana Edovina