Global debt levels soared to a record high of $233 trillion in the third quarter of 2017, the Institute of International Finance (IIF) said on Thursday, though it noted that robust economic growth meant debt-to-GDP ratios were declining, Reuters reported.
The Washington DC-based financial industry body said while total debt had risen by $16 trillion in the third quarter compared to end-2016, debt ratio to global gross domestic product (GDP) had fallen for the fourth quarter in a row as the world economy expanded.
It was referring to total debt incurred by the household, government, financial and non-financial corporate sectors.
“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,” IIF analysts wrote in a note. The analysts were quoted on Financial Express.
Yet the debt pile could act as a brake on central banks trying to raise interest rates, given worries about the debt servicing capacity of highly indebted firms and government, the IIF analysts wrote.
China which has accounted for the lion’s share of new debt in emerging markets, saw the pace of debt accumulation slow; debt rose by two percentage points last year to 294 percent of GDP, compared to an average annual increase of 17 percentage points in the 2012-2016 period.
The IIF warned, however, of “heavy emerging market redemptions” noting that over $1.5 trillion of bonds and syndicated loans would be maturing through end-2018. China, Russia, Korea and Brazil had heavy dollar-debt repayment schedule this year, it added.
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