The Institute of International Finance (IIF) announced that the two largest economies in the world, China and the United States, were the largest borrowers in Q1 2022, which led the global debt to rise to a record level of more than $305 trillion.
According to the institute’s data, seen by Economy Middle East, the total global debt rose by $3.3 trillion in Q1 of 2022.
The data indicated that China’s debt increased by $2.5 trillion over the first three months of the year, while the US added $1.5 trillion to its debt. On the other hand, public debt in the euro area declined for the third consecutive quarter. Meanwhile, emerging economies’ debt also reached a record level of about $100 trillion.
The global debt-to-GDP ratio has fallen to 348 percent, or about 15 percentage points from the record level hit a year ago, with the biggest improvements being in the EU.
Many emerging and mature market economies entered the latest Fed rate hike cycle with rising US dollar debt levels.
While the Russian-Ukrainian war will reduce global economic activity, growth is expected to slow this year, which will have repercussions on the debt dynamics.
“As central banks prepare to tighten monetary policies, this will raise lending costs, which will exacerbate debt vulnerabilities. This will have a more severe impact on borrowers from emerging markets where the investor base is less diversified,” the institute noted.
“Interest expenditures are becoming an increasingly heavy burden on governments – and sharp hikes are expected across mature markets,” it said.
In its view, under difficult market conditions, global debt issuance on ESG had lost its momentum, albeit to a lesser extent in emerging markets.
