Global debt declined in the first quarter

Global debt declined in the first quarter of this year, for the first time in 2.5 years. Developments in industrialized markets in particular contributed to the decline. On the contrary, indebtedness in emerging economies has reached a modern high. Data from the Institute for International Finance (IIF) pointed this out. The IIF said global debt fell by $ 1.7 trillion to $ 289 trillion (€ 239.22 trillion) in the first quarter. However, the debt of emerging economies grew. It rose $ 600 billion in the first quarter to a new record of more than $ 86 trillion. On the positive side, the growth rate was much slower than during the previous three quarters. Despite the decline in total value, debt continued to grow in terms of the ratio to gross domestic product (GDP). However, the growth rate was not significant, at around 1%, and global debt reached just over 360% of GDP in the first quarter. The IIF predicts that global debt in relation to GDP for the whole of 2021 should decline slightly due to the expected economic recovery and the reduction in new lending. By comparison, last year it jumped by more than 36 percentage points. In emerging economies, debt has risen to almost 60% of GDP from 52% of GDP before the pandemic. Governments in several states continue to feel the pressure of repeated lockdowns and slow rates of vaccination, the institute said. According to Emre Tiftik from the IIF, the growth of expenditures and the loss of income associated with the corona crisis have made debt service more difficult in countries such as the Philippines, India, Indonesia and Turkey. According to the IIF, the pressure associated with the transition to a low-carbon economy is also increasing for these countries. Failure to accelerate the pace of greenhouse gas emission reductions could increase governments' debt service costs.