Global debt touches new high

SINCE THE collapse of Lehman Brothers in 2008, global debt levels have soared, driven by rising public and private sector debt. As seen in Chart 1, total global debt was estimated at a staggering 225 per cent of global GDP or $164 trillion in 2016. The top three borrowers in the world are the United States, China and Japan. Put together, these three countries account for more than half of global debt, finds a new study by economists at the IMF.

However, trends in debt levels vary across countries. As seen in Chart 2, much of the increase in public sector debt has been led by advanced economies, while the rise in private sector debt has been led by emerging market economies. The study also points out that the gap between these two groups — advanced economies and emerging market economies — continues to be significant, exceeding, on average, 90 per cent of GDP (Chart 3).

A country-wise exploration reveals that China has seen a steady build-up in private sector debt, which has soared to a staggering 193.4 per cent of GDP in 2016. The comparable estimate for India is 55 per cent as seen in Chart 4. On the other hand, US households continue to be the most indebted, followed by those in Japan and China, while Indian households are among the least indebted in the world as seen in Chart 5. China has also seen an explosion in debt levels of non-financial corporations over the past few years (Chart 6).

On the public sector side, Japan continues to have the highest general government (Chart 7) and central government debt (Chart 8), followed by the US. Interestingly, the general government debt of China is lower than that of India.