The International Monetary Fund (IMF) reported that global debt as a percentage of economic output fell significantly in 2022 for the second consecutive year, However, the decline may be coming to an end as the post-global economic crisis pickup in growth fades.
“The ratio of the world’s total debt to gross domestic product (GDP) fell last year to 238 percent from 248 percent in 2021 and 258 percent in 2020,” the IMF said in an update to its Global Debt Database.
Despite the decline of the past two years, driven by strong growth and higher-than-expected inflation, it has recovered only about two-thirds of the COVID-19-induced spike in global debt. The ratio remains well above the 2019 level of 238% of GDP.
China has played a central role in the rise of global debt in recent decades, as indebtedness outpaced economic growth, and its debt burden has defied the moderation trend, growing to 272% of GDP in 2022 from 265% in 2021.
“These levels are similar to those of the United States, which saw its debt-to-total GDP ratio fall to 274% in 2022 from 284% in 2021,” according to the IMF report.
The world has been on a “roller coaster” of debt for three years, but it is likely to rise again in the medium term.
The IMF urged governments to adopt strategies to help reduce debt vulnerabilities in both public and household debt and non-corporate debt.
