The International Monetary Fund on Wednesday said that the global debt as a share of economic output fell significantly in 2022 for the second year in a row, but the decline may be ending as a post-COVID growth surge fades.

The IMF said in an update to its Global Debt Database that the world’s total debt to-GDP ratio fell last year to 238per cent from 248per cent in 2021 and 258per cent in 2020.

But the decline for the past two years, driven by strong growth and stronger-than-expected inflation, has recouped only about two thirds of the COVID-induced spike in global debt. The ratio remains well above the 2019 level of 238per cent of GDP.

China has played a central role in increasing global debt in recent decades as borrowing outpaced economic growth, and its debt burden has defied the moderating trend, growing to 272per cent of GDP in 2022 from 265per cent in 2021.

Those levels are similar to the United States, which saw its total debt-to-GDP ratio fall to 274per cent in 2022 from 284per cent in 2021, according to the IMF report.

The world has been on a debt “rollercoaster” for three years, but debt is likely to rise again over the medium-term, and the IMF urged governments to adopt strategies to help reduce debt vulnerabilities — both in public debt, household debt and non-financial corporate debt.

“The rebound of real GDP growth is fading. Inflation is projected to stabilise at a low level over the medium term,” the IMF said. “If global debt resumes its rising rend going forward, the debt rollercoaster since the pandemic will look nothing more than a temporary deviation around its long-term rising trend.”

Source: Reuters