Global debt is equal to 355 percent of global GDP. China's debt jumped by 335 per cent of GDP. Countries are going into greater debt to support companies and workers. The trend will continue in 2021. Finding a balanced exit strategy will be the big challenge.
Hong Kong (AsiaNews) – Global debt has reached US$ 281 trillion at the end of 2020; that is more than 355 per cent of global GDP, a record level due to the COVID-19 crisis, this according to the Washington-based Institute of International Finance (IIF).
China is one of the countries that saw its debt sore to new heights (+335 per cent of GDP), followed by Turkey, South Korea and the United Arab Emirates.
Beijing has focused on public spending on infrastructure to restart the economy, a choice that has led local governments to borrow.
To cope with the pandemic, governments, businesses and households have accumulated US$ 24 trillion in debt last year.
Fiscal stimulus, rescue plans, employment support measures, and expanded social safety nets have boosted to a large extent governments’ liabilities.
Analysts expect this trend to continue this year. With low (often negative) interest on loans, and economic growth rates higher than the cost of financing, borrowing is beneficial right now.
According to the IIF forecast, Governments with big budget deficits will increase their debt by US$ 10 trillion in 2021.
For governments, the task now is finding a proper exit strategy.
Cutting stimulus too quickly can lead to default and serial bankruptcies; but waiting too long could lead to unwieldy debt loads, making government budgets unmanageable.