Global debt soared to over $230 trillion in Q3 2017, about $16 trillion higher than its end-2016 level, according to the Institute of International Finance (IIF) in its “Global Debt Monitor – January 2018” released Thursday.
The IIF indicated that despite strong economic growth and declining debt to GDP ratios, the total debt increased by $16 trillion in Q3 in comparison with 2016.
However, it said the ratio of debt-to-gross domestic product fell for the fourth consecutive quarter as economic growth accelerated. It puts the ratio at currently around 318 percent, three percentage points below a high set in the third quarter of 2016.
“A combination of factors including synchronized above-potential global growth, rising inflation (China, Turkey), and efforts to prevent a destabilizing build-up of debt (China, Canada) have all contributed to the decline,” the IIF analysts wrote.
The Washington DC-based financial body said private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea,
Switzerland and Turkey with China accounting for the largest share of the debt in emerging markets.
According to the IIF analysts, the debt pile could act as a brake on central banks trying to raise interest rates, due to concerns raised about the debt servicing capacity of highly indebted firms and government.
The global debt means the total debt incurred by the household, government, financial and non-financial corporate sectors.
With China, Russia, Korea and Brazil having heavy dollar-debt repayment schedule in 2018, IIF added, caution should be exercised as over $1.5 trillion of bonds and syndicated loans would be mature by this year-end and might lead to “heavy emerging market redemptions”.