This deluge in borrowing is a widespread trend across economies. While the U.S. and Japan were the largest contributors across advanced economies, China, India, and Mexico drove the largest share in emerging markets. Overall, the global debt-to-GDP ratio reached 333% as higher debt servicing costs and growing debt burdens continue piling up.
A Growing Mountain of Debt
Below, we show how global debt climbed to an all-time high of $315.1 trillion in the first quarter of 2024:
Today, the largest share of debt is held by non-financial corporations, at $94.1 trillion, while government borrowings follow closely behind at $91.4 trillion. Meanwhile, the financial sector holds $70.4 trillion in debt and households carry $59.1 trillion.
While stimulus measures fueled an influx of borrowing, it is leaving many economies in a more precarious state. In America, debt servicing costs are now more than defense spending, and the interest bill is set to rise further. Consequently, the government may need to raise taxes or cut spending in order to tackle its debt. So far, neither political party has a meaningful strategy that addresses the country’s fiscal sustainability.
For emerging markets, increasing debt burdens present greater risks. These risks are especially acute if a country experiences sluggish growth during a high rate environment. In this scenario, many emerging markets may need to restructure their debt as borrowing becomes unaffordable.
