The decrease in private indebtedness compensated for the increase in public indebtedness and therefore the world debt remains high. In addition, notable differences between countries and income groups persist.
Yes ok The total debt was practically unchanged last year, it is still parked at high levels above 235% of the world’s gross internal product (GDP)according to the latest update of the global debt database of the International Monetary Fund (IMF). It should be remembered that the total debt reached a peak in the pandemic representing 258% of the global GDP in 2020when in the previous COVID-19 it was 230% of GDP.
But the 2024 data shows that while private debt was reduced to less than 143% of GDP, its lowest level since 2015, which reflects a reduction in household liabilities and a low variation in non -financial corporate debt, on the other hand, instead, Public debt increased to almost 93%according to the fund database, which reflects an annual survey on the amount and composition of the debt of governments, companies and homes. In terms of dollars, Total debt slightly increased Au $ 251 billion, with public debt by increasing au S99.2 billion and private debt decreasing au s151.8 billionsays the IMF in a recent comment on the official blog of the agency.
However, divergent trends are observed among countries according to income groups. In this regard, IMF economists, Gaspar Vitor, Carlos Eduardo Gonçalves and Marcos Poplaowski-lribeiro explain that global averages hide notable differences between countries and income groups: although the United States and China continue to play a fundamental role in the dynamics of global debt, as the last fiscal monitor of the fund (last April) showed, the levels of debt and deficit in many countries remain high in many countries. worrying in historical terms, both in advanced and emerging economies. They point out that “In the US, the general public debt increased last year to 121% of GDP (119%), while in China it increased to 88% (82%); but excluding the US, the public debt in advanced economies was reduced by more than 2.5 percentage points, up to 110% of GDP. The increases in some large advanced economies, such as France and the United Kingdom. counteracted by falls in Japan and smaller economies, such as Greece and Portugal. ” Now, excluding China, public debt in emerging markets and developing economies was reduced to less than 56% on average.
On the side of private debt, trends varied significantly between countries: while U.U experienced a significant fall of 4.5 percentage points, up to 143% of GDP, China recorded an increase of 6 points, up to 206% of GDP. “Among other emerging markets and developing economies, private indebtedness increased in larger economies such as Brazil, India and Mexico, but decreased in Chile, Colombia and Thailand”stand out. According to IMF data, The Argentine public debt (of the central government) represented more than 85% of GDP last year (there are no data available for private debt).
Why does the debt grow?
This panorama led the economists in the background to consider what drives public and private debt patterns. In this regard, they claim that “The persistently high world fiscal deficit, which averages about 5% of GDP, is the main driver of the increase in public debt. This deficit still reflects the costs inherited from COVID-19, such as social subsidies and benefits, together with the increase in net interest costs.”
While the decrease in private debt is due to different factors according to the country and the income group: in many advanced economies, companies are borrowing less, probably in response to moderate growth perspectives, continuing a trend initiated in 2023. “In the US, the solidity of their balances and liquidity also contribute to the reduction of corporate indebtedness. In other cases, the increase in public debt, together with the decrease in private debt, suggests a displacement effect, in which a high public indebtedness limits the availability of credit or increases its cost for the private sector, ”explain the organism’s economists.
For example, In China, the increase in private debt was driven by non -financial corporate debt. “This rebound, despite the persistent weakness of the real estate sector, reflects an still abundant credit supply, especially to support strategic sectors. Instead, household debt decreased slightly, since the weak demand for mortgages and concern for employment growth and wages continue to ballast indebtedness.”
Emerging advice and developing economies: prioritizing adjustment
On the other hand, in other parts of the large emerging markets and developing economies, “the increase in private debt is due to high interest rates and its impact on delinquency (as in Brazil), the improvement of the short -term growth prospects (as in India) and business mergers and acquisition They hold.
Gaspar, Gonçalves and Poplaowski-lribeiro emphasize low-income countries, where the recent dynamics of debt reflect a series of additional factors, including a more limited financial development, restrictive liquidity conditions and displacement effects linked to the link between sovereign debt and private debt.
Therefore, they recommend that “Governments should contribute to manage these trends prioritizing gradual tax adjustments within a medium -term credible plan to reduce public debt, avoiding private indebtedness and investment.” At the same time, they add, “promoting an environment that drives economic growth and reduces uncertainty will contribute to relieve public debt and foster private sector investment.”
Source: Ambito
