Global Debt: $348 Trillion Stats & Analysis

AI and defense spending at record high

Last year, global debt reached an all-time high of $348 trillion. The main reason is that large-scale investments were made due to the artificial intelligence (AI) boom, along with the expansion of related spending by each country in response to the US administration’s request to increase defense spending under Donald Trump.

The Institute of International Finance (IIF) announced on the 25th that global debt increased by nearly $29 trillion (4 trillion won) last year, reaching a total of $348 trillion (about 49 trillion won). IIF explained that this is the largest annual increase since COVID-19, and that this figure is a combination of government, corporate, and household debt. The expansion of fiscal deficits in major countries such as China, the United States, and Europe had a significant impact.

IIF analyzed that each country’s government’s increase in defense spending and increased investment to foster the AI ​​industry are the main causes of the increase in debt. The IIF predicted, “Europe’s policy to strengthen its defense capabilities will increase the EU government’s debt-to-GDP ratio by more than 18 percentage points by 2035,” and added, “If private capital is not supported early, the EU government’s debt ratio may increase further.” In addition, the analysis said, “A powerful global capital spending ‘supercycle’ centered on large-scale investments in AI-based data centers and resilient infrastructure is further increasing debt in each country.”

Global total debt has increased, but the debt-to-GDP ratio has fallen for five consecutive years, reaching 308%. The debt-to-GDP ratio is an indicator that measures the borrower’s ability to repay debt, and if it gradually decreases, it means that the ability to handle debt increases. However, the IIF explained that the results of this survey were largely influenced by a decrease in private debt, and the government debt ratio is still on the rise.

In fact, in the case of emerging countries, the debt-to-GDP ratio exceeded 235%, reaching an all-time high. IIF pointed out that government debt is growing rapidly in major emerging countries such as China, Brazil, Mexico, and Russia, and that they are facing the largest refinancing burden ever, with more than $9 trillion in debt coming due this year. The IIF expressed concern that “the combination of defense-focused fiscal expansion, interest rate cuts, and financial deregulation could cause government debt to grow more rapidly in the coming years.”

The expansion of government-led debt is putting a burden on the bond market. IIF explained that the interest rates on 10-year maturity government bonds in the United States and the United Kingdom are stuck at around 4%, and German government bonds, which are considered a representative safe asset in the Eurozone, have also risen from negative interest rates a few years ago to currently exceed 2%.

Reporter Moon Jae-yeon

www.koreatimes.net/Hot News

Media 1 (media@koreatimes.net)