IIF: Covid-19 detonated debt; liabilities average 355% of world GDP

World debt increased by $ 35.9 trillion during the year of the pandemic, reaching a record high of $ 281 trillion, estimated the International Institute of Finance (IIF). The balance of global liabilities is equivalent to 355% of the planet’s GDP.

The increase in public obligations was driven by government debt, acquired mainly to fund aid programs for households and businesses, which added $ 24 trillion to world debt.

During a press conference to present the Global Debt Monitor report, experts from the Institute explained that the other economic participants also turned to debt to get through the crisis.

Thus, non-financial corporations acquired obligations for 5.4 trillion dollars in the whole of last year; while banks increased their liabilities by 3.4 trillion dollars and households took on debt for 2.6 trillion dollars.

If debt is compared as a function of GDP, it is observed that in 2020 liabilities were acquired for the equivalent of 35 points of GDP in the world; a proportion that is far from the 10 points of the Product that grew in debt in 2008; and of the 15 additional points of GDP that increased in 2009.

Mexico and its liabilities

When making an approach on the fiscal situation in Mexico, the IIF shows that the liabilities of the federal government increased by 8.6 points of GDP in 2020, despite the fact that there was no countercyclical support program.

According to their accounts, the general debt of the public sector is equivalent to 45% of the Mexican GDP, which is above the 36.4% of the Product that was managed at the end of 2019.

Mexican financial corporations also resorted to borrowing to navigate the pandemic and the closure of the economy and increased their liabilities by 5.5% of GDP in the year to average 22.7% of GDP.

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While non-financial corporations operating in Mexico increased their debt by 5.2 points of GDP to leave it at the equivalent of 30.1% of GDP.

According to the Institute, Mexican families and households also had to resort to debt due to the closure of the economy, but they were the ones that acquired the least liabilities by increasing it by 0.9 points of GDP.

Among developed markets, the largest increases in debt were led by France, Spain and Greece, which increased their liabilities by 50%. They include government, financial and non-financial corporate debt as well as households.

While the emerging countries that increased their obligations the most were China, Turkey and Korea.

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