The size of world debt reached its maximum level in the entire history of observations. As calculated by the American Institute of International Finance (IIF), in the III quarter of 2019, the figure increased to $ 253 trillion and amounted to 322% of global GDP.
The volume of world debt is the total debt of the population, companies, financial institutions and governments of all countries. According to IIF experts, over the past five years, the value has increased by almost $ 30 trillion and will continue to grow in the near future.
“According to our calculations, in the context of low interest rates and weak financial conditions, the total world debt will exceed $ 257 trillion in the first quarter of 2020,” the organization’s study said.
Although the global economy began to slow, global debt growth, in contrast, accelerated. According to analysts, the main reason for this situation was the policy of central banks.
In 2019, global regulators began synchronously cutting interest rates to stimulate business activity and economic growth in their countries. Over time, the actions of central banks should lead to cheaper loans, an increase in domestic demand and investment. But at the same time, such a policy runs the risk of over-lending to countries.
“Now all the key economies in the world are in the phase of lowering rates, making loans and other borrowing cheaper. In those countries where high borrowing is the basis of economic growth, the appetite for cheaper loans has become even stronger, ”Ilya Grigoryev, debt market analyst at Ivolga Capital, explained to RT.
It is noteworthy that the debt of developed countries is about $ 180 trillion (383% of GDP) and more than doubles that of developing countries - $ 72 trillion (223% of GDP).
“Now the currencies of developing countries can not afford significant amounts of debt. It is in their interest to keep debt at a relatively low level for easier access to the global capital market. In addition, not all lenders agree to provide loans in local currencies, and obligations in dollars and euros can be economically dangerous for some countries, ”said Arseniy Dadashev, director of the Academy of Financial and Investment Management, in a conversation with RT.
However, there is an exception among developing countries. We are talking about China, whose total debt reached 310% of GDP. IIF experts explained this situation by the growth of lending in the country's corporate sector.
At the same time, among developed countries, the USA, Japan and the eurozone countries are experiencing the heaviest debt burden. According to the IIF, in the United States the total debt of the government, citizens and business exceeds 327% of the country's GDP. In the eurozone, the value is 388% of GDP, in Japan - 540%.
“Recently, the world economy is becoming more and more not real, but inflated. We see the appearance of financial bubbles that are able to inflate for a long time. Life on credit allows you to not only spend money, but also direct them to the development of production. Moreover, often production is built at the expense of borrowed funds secured by future earnings of enterprises. This is not entirely correct, and sooner or later the bubble may collapse, ”said FINAM Group analyst Alexei Korenev.
According to experts, in the event of a further slowdown in the global economy, the profits of global companies and states will begin to decline. Thus, it will become more difficult for businesses and governments to pay bills. As a result, the most loaned organizations and countries run the risk of facing a crisis.
“If economic conditions become worse, then enterprises receive less profit, and the volume of their debt does not change. As a result, delays in obligations begin. This problem has two solutions: either borrowers will resort to debt refinancing, which over time will further exacerbate the problem, or will begin to default on their obligations. Such a scenario suggests the onset of the financial crisis, ”said Ilya Grigoriev.
Life experience
It is curious that Russia has one of the lowest levels of debt in the world today. Currently, the country's total debt burden is only 90% of GDP.
Moscow began to noticeably reduce its dependence on foreign loans after the 1998 default. About this in an interview with RT told the expert of the company "International Financial Center" Gaydar Hasanov. According to him, along with a decrease in the level of debt, Russia simultaneously began to increase the volume of foreign exchange reserves. Such a policy allowed the country to create a financial airbag in case of external shocks.
“After 2000, Russia began to early repay all its debt to the International Monetary Fund (IMF). Moscow also paid the remaining obligations from the times of the USSR to the London and Paris lender clubs. Now Russia's monetary reserves have grown so much that now the country can safely cover its external debt, ”Hasanov concluded.