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$152 trillion global debt risk for world economy

Staff Writer | October 10, 2016
The global economic growth is further challenged by the world’s debt, which according to the International Monetary Fund (IMF) has now reached a record $152 trillion.
Global economy   The debt is 225% of global GDP
This, the IMF recently noted, represents 225% of global GDP and adds to risks that the global economic recovery could turn into stagnation or even recession. “Two thirds of this debt is private,” IMF points out and stresses that high and rapidly increasing private debt often leads to financial crisis. Financial recessions are longer and deeper than normal recessions.

“The sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery,” the Washington DC-based Fund cautions.

This debt burden is mounting at a time when slow growth means inflation and interest rates will remain low, making it hard for companies, individuals and governments to earn their way out of debt.

A combination of low growth, high debt and weak banks could push the world in a dangerous financial and political direction, the IMF warned.

According to the Fund, the debt distribution worldwide was very uneven. It is mainly concentrated in advanced and a few systemically important emerging market economies.

Debt levels are generally lower in low income countries. In some emerging markets, easy financial conditions have led to accumulation of private debt; a case in point is China.