Developed markets' overall debt jumped to 433 per cent of GDP and emerging market debt-to-GDP hit nearly 250 per cent in the third quarter.
Global debt is expected to soar to a record $277 trillion by the end of the year as governments and companies continue to spend in response to the Wuhan virus pandemic, the Institute of International Finance informed in a report on Wednesday.
Developed markets' overall debt jumped to 432 per cent of GDP in the third quarter, from a ratio of about 380 per cent at the end of 2019. Emerging market debt-to-GDP hit nearly 250 per cent in the third quarter, with Communist China reaching 335 per cent, and for the year the ratio is expected to reach about 365 per cent of global GDP.
The pace of debt accumulation will leave the global economy struggling to reduce borrowing in the future without significant adverse implications for economic activity, the authors of the Institute of International Finance warned on Wednesday.
There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity, they emphasised.
Luis Oganes, who heads the market research on emerging markets at JPMorgan, argued that emerging economies ran the risk of rising inflation if they sought to monetise debt by buying their own bonds, as some have done this year, or of deflation if they allowed debts to rise too far.
High debt levels will lead to zombie banks and zombie companies that constrain growth, he observed.
The US and the EU debt rose by $ 10.5 trillion in September
Total U.S. debt is on track to hit $80 trillion in 2020, the analysts , up from $71 trillion in 2019. In the Euro area, debt rose by $1.5 trillion to $53 trillion through September.
Among developing economies, Lebanon, China, Malaysia and Turkey have seen the biggest increases in non-financial sector debt ratios so far this year.
Emerging market governments' declining revenues have made paying down debt much more onerous even amid record low borrowing costs across the globe.
Through the end of next year, about $7 trillion of emerging market bonds and syndicated loans will come due, about 15 per cent of which is denominated in U.S. dollars, the IIF economists stated.