Global debt $313 trillion GDP 3.3 times emerging countries ‘worst’ Germany ‘growth plunges’
The Institute of International Finance said that global debt surged by $15 trillion last year to $313 trillion, which is 3.3 times higher than GDP, and that emerging countries' debt repayment ability has deteriorated to its greatest extent.
German Deputy Chancellor Robert Habeck said in the government's annual economic report on the 21st that "the economy is in trouble," and lowered the economic growth forecast from last fall's forecast of 1.3% expansion to 0.2%.
Germany's central bank, the Bundesbank, said in a report released on the 19th that the German economy, Europe's largest, will contract in the first three months of this year.
AP said of the German government report, “This follows a 0.3% contraction in Germany’s overall economy last year,” adding, “Germany is struggling with a shortage of skilled workers, excessive bureaucracy, high interest rates and delays in investment in new projects.” “The outlook has been lowered,” the report said.
The New York Times reported on the 21st that thousands of small and medium-sized businesses in Germany's economic backbone have issued a letter warning that Germany is losing its edge as the country's central bank signals the threat of a recession looming over the country in the first three months of 2024.
The Institute for International Finance (IIF), a financial services trade group, reported that global debt surged by more than $15 trillion in the fourth quarter of 2023 compared to the same period last year, reaching a record high of $313 trillion in global debt, while developing countries are experiencing a decline in gross domestic product (GDP). ) announced on the 21st the results of a study showing that the debt-to-equity ratio had reached a new high.
The IIF specifically expressed ‘concern over the possibility of a revival of inflationary pressures’ and stated that ‘borrowing costs may increase due to the recovery of inflationary pressures.’
The IIF report also said geopolitics has emerged as a “structural market risk” and that “deeper divisions have raised concerns about fiscal discipline globally,” adding, “Government fiscal deficits remain well above pre-pandemic levels, and regional “The acceleration of conflict could trigger a sharp surge in defense spending,” he said, pointing to the debt repayment crisis caused by the surge in defense spending.
“In 2023, global debt accounted for 330% of total growth in global debt as a percentage of GDP, a decline of about 2 percentage points,” said the IIF debt report reported by Reuters. “The numerical value indicating ability was passed on as the highest record.”
“About 55% of this increase came from mature markets, led by the US, France and Germany,” the IIF said in its Global Debt Monitor. “In some emerging markets, measures of a country's ability to repay its debt have reached record highs, including India, Argentina and China. , Russia, Malaysia, and South Africa will see the largest increases, which could increase difficulties in repaying debt.”
“In 2023, global debt accounted for 330% of the total increase in global debt as a percentage of GDP, a decline of about 2 percentage points,” said a report by Reuters. “The figure representing was passed on as the highest record.”
The IIF report found that as interest rates have risen sharply in most countries around the world, debt has increased by $100 trillion over the past decade, with government debt rising from $33 trillion before the 2008 financial crisis to $71 trillion before the 2022 pandemic. It grew to trillion dollars, and last year it grew to $89.9 trillion due to the rise in interest rates due to the pandemic.
Regarding the debt repayment crisis in emerging countries, the report said, "With the Federal Reserve's interest rate cut imminent, uncertainty surrounding the U.S. policy interest rate and the trajectory of the U.S. dollar will further increase market volatility and tighten financing conditions for countries with a relatively high dependence on external borrowing." “It can be made,” he said.
“At the beginning of the year, which is generally a busy time for bond sales of all types, Saudi Arabia, Mexico, Hungary, Romania and several other countries issued large-scale bond issuances, reaching a record high of $47 billion in January,” the report said. “If optimism persists, there is an opportunity for European governments and non-financial companies in mature markets to reverse their ongoing deleveraging, and both European governments and European non-financial companies are advantageous because they have less debt than before the pandemic.” and revealed the relative risk transfer structure.
As of January this year, the United States' national debt reached an all-time high of $34 trillion due to high debt interest rates.
The Chinese government's debt has increased to 25% of GDP since the pandemic, and household and corporate debt is also rapidly increasing, raising concerns about a financial crunch due to the real estate crisis.
The German economy suffered a surge in energy costs due to the absence of Russian gas, which hit energy-intensive industries and led to high consumer inflation, which weakened purchasing power and led consumers to reduce spending.
Germany experienced some relief from these two factors, as oil and gas prices fell amid the global inflation situation and wages began to rise to make up for inflation and recover lost disposable real income. However, due to the slowdown in world trade, Germany's exports of automobiles and industrial machinery fell. The main axis of the economy was hit.
Reuters said Germany's unemployment rate remains low, meaning last year's recession did not resemble a classic recession.
Regarding the German economic downturn, the AP said, “High interest rates from the European Central Bank (ECB) are delaying the construction of new homes and offices, and companies say they cannot find skilled workers,” adding, “Excessive bureaucracy and long approval processes are a problem.” Flaws in Germany's 'bureaucracy-led economy' have delayed the construction of new projects, such as energy generation, and investments in digital and transport infrastructure, after the government focused on balancing the budget to avoid piling up new debt, he said. pointed out.
In the German economy, the government's arbitrary fiscal creation has been blocked by the Constitutional Court's ruling in response to the 2009 constitutional amendment to limit deficit spending, saying, "Special emergency funds cannot be used to avoid fiscal deficit limits."
Thousands of small and medium-sized businesses that form the backbone of Germany's economy warned this week that Germany was losing its edge as the country's central bank signaled the threat of a recession looming over the country in the first three months of 2024.
“Germany is losing its ability to remain internationally competitive every day: high energy prices, labor shortages, slow efforts to digitize bureaucracy,” said an open letter to the government from 18 associations representing companies from various industries in Germany. “These are concerns facing companies, such as high taxes,” he said, adding, “The economic downturn is of our own making.”