The world is going to experience a debt crisis that will last for the next 10 years and it is not going to end well, as global debt has reached a record 307.4 trillion. dollars last September.
Both high-income countries and emerging markets have seen a significant increase in their debt, which has increased by 100 trillion dollars compared to a decade ago, fueled in part by a high interest rate environment.
Global debt is approaching record highs
As a share of global gross domestic product, debt has risen to 336%. This compares with an average debt-to-GDP ratio of 110% in 2012 for advanced economies and 35% for emerging economies. It was 334% in the fourth quarter of 2022, according to the latest global debt tracker report from Trust Economics.
Is a global debt crisis coming?
To cover debt payments, it is estimated that around 100 countries will have to cut spending on vital social infrastructure, including health, education and social protection.
Countries that manage to improve their fiscal health could benefit by attracting labor, capital and investment from abroad, while those that do not could lose talent, revenue — and more.
Some of the larger countries that do not address their debt issues will die a slow fiscal death while some emerging economies could potentially default.
Mature markets such as the US, UK, Japan and France were responsible for over 80% of the debt build-up in the first half of last year. While in the case of emerging markets, China, India and Brazil showed the strongest increases.
Debt repayment will become more of an issue as the population in developed countries continues to age and workers become scarcer. Debt repayment tools are mainly based on either raising taxes or growing the economy at growth rates greater than the rates of debt accumulation.
