Global debt climbs $7 trillion to record-high $318 trillion in 2024

The Institute of International Finance (IIF) released a report showing that global debt increased by $7 trillion last year, reaching a record high of $318 trillion. Despite the massive amount, this increase was still lower than the $15 trillion increase in 2023, when market expectations of a Federal Reserve rate cut triggered a borrowing spree.

The report noted that the global debt-to-GDP ratio rose for the first time in four years due to slower GDP growth and easing inflationary pressures. This indicates that the global economy is facing new challenges, and debt risks need to be closely monitored.

The report emphasizes: "An increasingly rigorous review of fiscal balances, especially in politically polarized countries, has become a prominent feature in recent years." Although the U.S. government's debt levels continue to rise, market reactions have been relatively calm, thanks to the strong performance of the U.S. economy, productivity growth, and the safe-haven status of U.S. Treasury bonds. However, not all countries enjoy this advantage.

Emerging markets dominate global debt growth. The report shows that the global debt-to-GDP ratio increased by more than 1.5% compared to 2023, reaching nearly 328% of GDP, the first annual increase in the debt ratio since 2020. Among them, about 65% of global debt growth came from emerging markets, mainly concentrated in China, India, Saudi Arabia, and Turkey.

Emerging market borrowing activities, as well as a record $8.2 trillion in debt that needs to be rolled over this year, could undermine these countries' ability to cope with political and economic challenges. The report warns that increased trade tensions and the freezing of U.S. foreign aid may trigger serious liquidity challenges and limit their ability to roll over and access foreign currency debt. Therefore, it is crucial for emerging markets to strengthen domestic revenue mobilization to enhance their resilience to external shocks.

Meanwhile, debt accumulation in developed countries is mainly concentrated in the United States, the United Kingdom, Canada, and Sweden. Last year, the total debt of developed countries climbed to $214.3 trillion, and the total debt of developing countries was $103.7 trillion. In addition, global household debt reached $60.1 trillion, public sector debt was $95.3 trillion, non-financial corporate debt was $91.3 trillion, and financial institution debt was $71.4 trillion.

The Institute of International Finance expects global debt growth to slow this year due to uncertainty in global economic policies and persistently high borrowing costs. However, the report also warns that despite high borrowing costs and economic policy uncertainty, the forecast of a $5 trillion increase in government debt this year may rise due to calls for fiscal stimulus and increased military spending in Europe.