The pandemic has triggered the largest one-year surge in global debt since the second World War, according to the International Monetary Fund (IMF).
Total debt levels, which include government, household and corporate borrowings, rose to a record $226 trillion (€200 trillion) or 256 per cent of gross domestic product (GDP) in 2020 as the world economy was engulfed by a global health crisis and a deep recession, the Washington-based think tank said.
“Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations and rising inflation,” it said.
The IMF’s figures, derived from its Global Debt Database, suggested borrowing by governments accounted for slightly more than half of the increase as the global public debt ratio jumped to a record 99 per cent of GDP.
Private debt from non-financial corporations and households also reached new highs, it said.
Debt increases were “particularly striking” in advanced economies, the IMF said, noting public debt rose from around 70 per cent of GDP in 2007 to 124 per cent of GDP in 2020.
Private debt over the same period rose at a more moderate pace from 164 per cent to 178 per cent of GDP.
The IMF said public debt now accounts for almost 40 per cent of total global debt, the highest share since the mid-1960s, noting the build-up was attributable to the two major economic crises – the 2008 financial crisis and the current pandemic.
The fund's report highlights a massive debt divide between developing economies and advanced ones. Advanced economies and China accounted for more than 90 per cent of the $28 trillion debt surge in 2020.
“These countries were able to expand public and private debt during the pandemic thanks to low interest rates, the actions of central banks (including large purchases of government debt), and well-developed financial markets,” the IMF said.
Economies
“But most developing economies are on the opposite side of the financing divide, facing limited access to funding and often higher borrowing rates,” it said.
Irish government debt rose to 105 per cent of national income last year as the State borrowed heavily to cope with the fallout from coronavirus.
Finance statistics published by the Central Statistics Office (CSO) show gross government debt climbed to €217.9 billion in 2020.
This equated to 104.7 per cent of GNI* (modified gross national income), the Central Statistics Office’s bespoke measure of national income, which weeds out distorting multinational data.
The State’s debt to GDP ratio was put at 58.4 per cent, up from 57.2 per cent in 2019.
