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The size of global debt has reached a record 327% of GDP
Material posted: Publication date: 29-06-2017

The size of the total debt in the world, has updated the historical maximum and amounted to 327% of global GDP in the first.

The size of global debt has reached in the first quarter of 2017, a record $217 trillion, an increase of $600 billion per year on the background of active borrowing of emerging markets. A new record is equivalent to 327% of global GDP, it follows from the overview of the global debt market, prepared by the Institute of international Finance (Institute of International Finance, IIF). The document is at RBC. The IIF is an international Association representing more than 500 financial market participants.

In the total debt included all debt of governments, banks, corporations and households.

The global debt burden is not evenly distributed, the authors of the review: in some countries or industries it is decreased in others, on the contrary, increases. The latest surge in debt can create obstacles to long-term growth and, as a consequence, risks to financial stability, warns IIF.

The steady growth of debts on the background of deterioration in credit quality in the nonfinancial sector (especially in emerging markets) continues to contribute to the volume increase of potential state obligations, which will be forced, as in the previous crisis, to take the clearing balances of the private sector. In some countries, particularly in China, a sharp increase in debt has become a negative impact on sovereign creditworthiness.

The sharp increase in debt over the year showed the world's largest economy, the US and China: both countries had risen to $2 trillion. In China it reached $32,7 trillion, and the United States exceeded $63 trillion. The growth of the us economy in nominal terms has overtaken the growth of debt, causing the ratio of recent to the us, GDP fell by 2.5 p. p.

Despite the significant increase in debt in China, the growth rate has slowed, especially in the non-financial corporate sector — a consequence of the tightening of monetary policy. However, Chinese households, on the contrary, increased their borrowing. In the first quarter of 2017, the ratio of household debt to GDP reached a historical high of 45%, significantly surpassing the average for emerging markets — 35%. As of may the total debt of China has surpassed 304% of GDP, the IIF estimated.

Total emerging markets debt increased $3 trillion, exceeding the $56 trillion, and accounted for 218% of GDP. Fastest its relation to GDP grew in China, Chile, Colombia and Turkey. In Thailand, Brazil, Russia and Hungary on the contrary, it decreased.

In late may, Moody's Investors Service for the first time since 1989, downgraded the sovereign credit rating of China from Aa3 ("very low credit risk") to A1 ("low credit risk"), installing on it a stable Outlook. The Agency explained the slow pace of reforms, the large debts of the country. Although Moody's lowered the rating of the Chinese for almost 30 years, other agencies do this more often. The latter was Fitch, which downgraded the sovereign rating of China in 2013.

In September 2016, Moody's downgraded Turkey's sovereign rating to "junk" level of Ba1 with a stable Outlook, also citing the increased risks associated with the need to increase external borrowing. and the weakening of indicators such as economic growth and stability of institutions.

Of the four components of debt, which measures the IIF, Russia for the last four quarters grew by only debt — from 15.9% of GDP at the end of March 2016 to 16.3% of GDP at the end of March this year. The ratio of household debt to GDP decreased to 14.7% (15.6%), debt of the financial sector, to 11.8% (from 14.4%), non-financial sector — to 48.6% (from 56.1%). Until the end of 2017, Russian borrowers have larger debt repayment, notes the IIF. According to the Bank of Russia, in the second half will have to pay $43 billion in principal and $8.3 billion in interest.

Oleg Makarov


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