Global debt reached a new record high in 2023, standing at 289.6 trillion euros. This upward trend has accelerated at an alarming rate over the last decade, calling into question its sustainability and representing a ticking time bomb for the world economy.

Global household, corporate, bank, and government debt totalled 289.6 trillion euros at the end of 2023, up from 275.4 trillion euros in 2022. A new record according to calculations by the International Institute of Finance (IIF). The total volume of sovereign debt and corporate bonds is almost 92 trillion euros, a figure similar to global GDP, while household debt has risen to 53.4 trillion euros.

This will lead to growing funding pressures, especially in emerging economies, where the amount of corporate bonds maturing in the next three years represented 51% (EUR 4 trillion) of the total in 2023.

This global fiscal deficit has been spurred by the growth of debt in major economies, especially that of the United States, which according to the IMF reached 123.3% of GDP in 2023 and will rise to 126.9% later this year. In turn, the debt of the Chinese economy grew to 83% of GDP in 2023, is expected to reach 87% in 2024 and to exceed 100% in 2027.

The IMF forecasts that global public debt will rise by one percentage point of GDP each year over the medium term, and warns that at the projected rate “global debt will reach 100% of GDP by the end of the decade”. Revenue and expenditure gaps in national budgets are expected to add €4.9 trillion annually between 2024 and 2027.

The debt burden

Uncontrolled public debt is a burden on the economy, slowing productivity, raising taxes and making it harder for the private sector to finance itself. Each year that this accumulated debt increases, the burdens become heavier and economic risk grows.

The long-term trend is one of inexorably rising debt, driven by the chronically high deficits of developed market governments. The burden of debt repayment imposes a heavy toll on future generations, diverting funds from spending on infrastructure, education and social services.

Politicians would have people believe that slowing economic growth, falling real wages and persistent inflation are external factors that have nothing to do with the actions of their governments. They rarely explain that these same governments are directly responsible for the fiscal policy, geopolitical conflicts and excessive money printing that lie behind deficit spending and the loss of peoples’ purchasing power.

As long as it is sustainable, debt is a necessary instrument for growth, yet the increase experienced in recent years is far from sustainable. This is forcing each nation to devote a greater proportion of its income to cover these debt obligations. A fact that, in practice, can end up having devastating consequences for a large part of the population.

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