The IIF, whose members include more than 400 banks and financial institutions around the world, said debt has already soared by $ 15 trillion this year to $ 272 trillion as of September. Governments, mostly from developed markets, accounted for almost half of the increase.
Total developed market debt jumped to 432% of GDP in the third quarter, from a ratio of around 380% at the end of 2019. Emerging market debt to GDP reached almost 250% in the third quarter -China reached 335% – and for the year the proportion is expected to reach around 365% of world GDP.
“There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity,” the IIF said in its report.
Total US debt is on track to reach $ 80 trillion by 2020, according to the IIF report, up from $ 71 trillion in 2019. In the euro zone, debt increased by $ 1.5 trillion to $ 53 trillion dollars to September.
The declining revenues of emerging market governments have made debt servicing “much more onerous”, even amid record low global borrowing costs.
By the end of next year, about $ 7 trillion in emerging market bonds and syndicated loans will mature, of which about 15% are dollar-denominated, the IIF said.
Officials from the Group of 20 agreed last month to extend the Debt Service Suspension Initiative (DSSI) on official bilateral debt payments through the first half of 2021 and said they would consider another six-month extension in April.
The global economy would contract 4.4% this year and expand 5.2% in 2021 according to estimates from the International Monetary Fund, as pandemic-induced quarantines and travel restrictions weigh on economic output.