The post-pandemic rebound in world growth and inflation last year meant the amount of debt sloshing around the global economy saw its first annual fall in dollar terms since 2015, a widely tracked study has shown.
The Institute of International Finance report published on Wednesday estimated that the nominal value of global debt declined by some $4 trillion, bringing it fractionally back under the $300 trillion threshold breached in 2021.
With borrowing costs on the rise, particularly for emerging markets, the retrenchment was driven entirely by wealthier, mature markets though, which as a group saw total debt decline to $200 trillion from $206 trillion a year ago.
In contrast, the amount of developing world debt hit a fresh record high of $98 trillion with Russia, Singapore, India, Mexico, and Vietnam seeing the largest individual rises.
Stronger economic activity and higher inflation meanwhile, both of which erode debt levels, saw the global debt-to-GDP ratio drop over 12 percentage points to 338% of GDP, marking the second annual drop in a row.
Again, though, the improvement was driven by developed markets which saw an overall 20 percentage points fall to 390%. The emerging market debt ratio rose by 2 percentage points meanwhile to 250% of GDP, largely driven by China and Singapore.
Breaking the numbers down further, the IIF, a global banking trade group, estimated that the emerging market government debt-to-GDP ratio climbed to almost 65% of GDP in 2022 from just under 64%.
“The external public debt burden of many developing countries worsened due to sharp losses in local currencies (in 2022) against the dollar.” the IIF said, adding that it had pushed international investor demand for local currency EM debt to multi-year lows, “with no sign of imminent recovery”.