Global Debt Surges to Record $307 Trillion in Q2 despite Rising Interest Rates

• 26 Sep 2023

According to a recent study, global debt reached an all-time high of $307 trillion during the second quarter of the year, even as rising interest rates slowed bank credit growth.

Key Points

• Record Global Debt: Despite the impact of increasing interest rates on bank lending, global debt in dollar terms has surged by $10 trillion in the first half of 2023 and by a staggering $100 trillion over the past decade.
• Rising Debt-to-GDP Ratio: The latest increase has pushed the global debt-to-GDP ratio higher for a second consecutive quarter, reaching 336%. Prior to 2023, this ratio had been declining for seven quarters.
• Factors behind Rising Debt Ratio: Slower economic growth and a slowdown in price inflation were cited as the main drivers of the rising debt ratio.
• The sudden surge in inflation had previously led to a sharp decline in the debt ratio over the past two years.
• Origins of Debt Build-Up: Over 80% of the recent debt accumulation originated in developed countries, with the United States, Japan, Britain, and France witnessing the largest increases. Among emerging markets, China, India, and Brazil contributed significantly to the debt rise.
• Impact on Government Interest Expenses: As interest rates rise alongside higher debt levels, domestic debt pressures will intensify, particularly concerning government interest expenses.
• Impact on Emerging Markets: Prolonged high rates in the United States could direct necessary investments toward less-risky developed nations, potentially pressuring emerging markets.