Current Debt stands at 355% of global GDP, according to IFI. Experts estimate that by 2021 more than USD 70 billion could be added to the Debt.
Two hundred thirty-three billion dollars is an unprecedented figure that is already making history when it comes to world debt. The end of 2020 was crucial for skyrocketing such amount, and the beginning of 2021 keeps promising an even more significant increase.
The coronavirus pandemic, together with the economic stimulus policies that various governments adopted worldwide, are the causes that triggered the Debt.
Members of the Institute of International Finance (IFI), with the representation of the expert Emre Tiftik, point out that the Debt increased at least 20 billion dollars over the past year. This amount represented 7 billion dollars more than what financial organizations previously stipulated, placing indebtedness at 355% of global GDP.
The entity points out that countries such as Spain, France, and even Greece are the ones that have committed the most to state loans. Countries like China have experienced the most significant increase in their debt-to-GDP ratio. Other economies like Turkey, and the United Arab Emirates, also show worrying numbers. On the other hand, public Debt keeps being high in nations like India.
According to the IFI, the governments living such enormous budget deficits will show a skyrocket of their Debt by amounts like8.3 billion dollars or more by 2021. In this sense, this year seems to promise that an additional 76.2 billion dollars will adhere to the already existing Debt.
After the advances regarding the vaccination process due to coronavirus, there is a general thought among economists that foresees the increasing the Debt as a tendency if organizations and the governments don’t take action soon as possible.
Since 2018 the experts determined that the world deficit increased in worrying numbers, going from 318% of GDP to 320% in one year.
The most vulnerable to Debt is the private sector
The private sector could suffer the most because of this situation, as companies in this niche have increased their dependence on government support to avoid bankruptcy and defaults. However, economists stressed that governments need to develop an innovative global strategy for “these extraordinary fiscal measures.”
Experts also recommend the withdrawal of economic stimulus measures. A plan that they must evaluate in order not to generate even more crisis in the financial sector. This recommendation comes from Mervyn King, former governor of the Central Bank of England, who foresees a critical situation in the United Kingdom and the United States.
The conditions of the world economy are undoubtedly exceptional due to the coronavirus pandemic. As debt numbers increase to worrying levels, US banks respond negatively to excessive cash circulating on the market due to over-issuance of dollars and financial aid.
By: Jenson Nuñez