File Photo: The International Monetary Fund logo is seen inside its headquarters at the end of the IMF/World Bank annual meetings in Washington, US. Reuters
The report is a part of an update to the IMF’s Global Debt Database (GDD), a dataset covering private and public debt in 190 countries dating back to the 1950s.
The report estimates that the decline in the debt to GDP ratio in the last two years at 20 percent. They attribute the decline to the rebound in economic activity after a sharp contraction in the early stages of the COVID-19 pandemic and higher-than-expected inflation.
The report also shows that the world’s public debt declined 3.6 percent to 92 percent of GDP in 2022, slightly above $91 trillion.
“The eight percentage points decline in the last two years offset only about a half of its pandemic related surge, as global public debt remained 7.5 percent above its 2019 level,” the report pointed out.
Moreover, the report data indicates that private debt, which includes household and non-financial corporate debt stocks, drove the overall reduction, falling by 6.4 percent to 146 percent of GDP in 2022, or close to $144 trillion.
The fall in global private debt over the last two years, 12 percent in cumulative terms, almost offsets the 14-percentage-point surge in 2020, bringing it close to 2019 levels, according to the report.
In emerging markets, excluding China, overall debt dropped by 7.6 percent to reach 124 percent of GDP in 2022 with private debt driving the decline.
“Private debt dropped by 4.5 percent to 69 percent of GDP, as household and non-financial corporate debts in 2022 fell below their respective pre-pandemic levels. Public debt declined three percentage points in 2022,” the report explained.
On the other hand, the dip in public debt over the last two years reversed only two-thirds of the surge seen during the pandemic, as public debt stood at 55 percent of GDP, still 3.3 percent of GDP higher than its pre-pandemic level in 2019.
In this respect, the IMF explained that fiscal deficits kept public debt levels elevated, as many governments raised their spending to boost growth and respond to food and energy price hikes even as they ended pandemic-related fiscal support.
According to the GDD data, China played a key role in increasing global debt in recent decades as borrowing outpaced its economic growth.
China’s debt as a share of GDP has risen to about the same level as in the United States. However, China’s total debt, amounts to $47.5 trillion, still well below that of the United States (close to $70 trillion), according to the GDD.
Moreover, China’s 28 percent share is the largest in the world.