Global debt burdens rose during the second quarter as households took advantage of low mortgage rates and governments continued to borrow heavily to revive economies hit by the pandemic.
The amount of debt owed by the world swelled during the three months by about $4.8 trillion to a record high of $296 trillion, according to a report by the Institute of International Finance.
Households added $1.5 trillion in debt during the first half of the year, led by the United States, China and Brazil, with homebuyers benefiting from lower interest rates and increased spending as countries emerge from lockdown.
Government and corporate debt increased by $1.3 trillion and $1.2 trillion, respectively, over the six-month period.
At the same time, the size of the debt relative to the size of the global economy has fallen for the first time since the onset of the pandemic as growth picks up. The debt burden totaled about 353% of annual global economic output, nine percentage points lower than the peak during the first three months of 2021.
“The recovery has not been strong enough to bring debt ratios below pre-pandemic levels in most cases,” IIF wrote in the report. Excluding the financial sector, only Mexico, Argentina, Denmark, Ireland and Lebanon have a debt-to-GDP ratio below the pre-pandemic level, the report found.
“Emerging market debt excluding China has risen to a record close to $36 trillion, driven by government borrowing in Brazil, Korea and Russia.”
Global issuance of sustainable bonds and loans is expected to reach $1.2 trillion in 2021. It has already reached $800 billion, surpassing the total for the whole of last year.
“The pace of China’s debt build-up has been much steeper than in other countries,” the IFF wrote. It grew by $2.3 trillion to $55 trillion in the second quarter, with non-financial institutions accounting for more than 40% of the rise.