China, India able to absorb share of record coronavirus-induced global debt levels with ‘growth credibility’
- Global debt surged to US$281 trillion last year, leading the overall debt to gross domestic product (GDP) ratio to rise by 35 percentage points to 355 per cent
- Institute of International Finance (IIF) says half of the debt increase globally last year was accrued by governments in an effort to offset the impact of the coronavirus
Developing economies with strong growth potential like India and China should not panic too much just yet amid rising debt levels after a new report showed the coronavirus pandemic pushed global borrowings to a new high last year after many governments turned to stimulus to stop the associated economic fallout.
Global debt surged to US$281 trillion last year, leading the overall debt to gross domestic product (GDP) ratio to rise by 35 percentage points to 355 per cent, which was much higher than the increase during the global financial crisis in 2009, according to the latest calculation by the Institute of International Finance (IIF), an industry group of financial companies based in Washington.
This was particularly strong in developed countries led by France, Spain and Greece, where public debt soared the most, but the number of corporate bankruptcy filings also fell significantly.
A fast debt build-up is alarming partly because global debt had already risen to a historical high before the pandemic broke out worldwide at the start of last year, and it could take years to withdraw from supportive government measures without causing surging bankruptcies and non-performing loans.