If you take only emerging markets, Debt fell from US$98.7 billion to US$96.2 billion.
The data comes from the quarterly Global Debt Monitoring carried out by the IIF, a Washington-based organization created in the eighties in the midst of the international debt crisis by 38 banks from the most industrialized countries.
The decline in the third quarter was amplified, in part, by the strength of the dollar, which reduces the debt burden in other currencies when measured in terms of the US currency.
Debt currently represents 343.3% of the world’s Gross Domestic Product (GDP), which is almost 20 percentage points less than its peak last year.
Inflation in various economies helped to alleviate the percentage of debt in relation to GDP, as the nominal value of the latter grew, according to the IIF.
The risk: interest rates
Despite the fall in debt, the risk now resides in interest rates, according to the report released by the Bloomberg agency.
The main central banks of the world such as the US Federal Reserve (FED) or the European Central Bank (ECB) – applied successive rate hikes in order to reduce strong inflation, but this entails higher interest rates for households, companies and governments.
“The interest bill in the world is about to rise. Higher financing costs represent a great source of risk for financial and social stability in countries with heavily indebted sectors,” warns the report written by IIF economists.
Low-income households and small businesses, which are more exposed to loans with variable rates, will be especially affected.
An example of this is mortgages, which led countries like Spain to recently develop measures to alleviate the pressures of higher rates on households, after years in which they were close to zero or even negative.
But different governments around the world will also face greater spending: from the advanced economies of the Group of Seven (G7) to emerging markets in Europe and Africa.
On the other hand, the higher rates discourage taking on more debt, while making it difficult for countries with a high debt burden to access it.
The countries of Africa and Latin America are especially exposed to high levels of debt, and therefore, to the ups and downs of the international financial situation.
Source: Ambito
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