The world’s appetite for borrowing is growing with global debt expected to reach the next milestone of $200 trillion as early as this year, according to ratings agency S&P Global.
That will reportedly account for 265 percent of the world’s annual economic output, amounting to a 14-point rise as a percentage of world GDP. The dramatic surge was triggered by both the economic plunge due to the coronavirus pandemic, and the extra borrowing that governments, firms and households have had to fall back upon, the New York-based agency said.
“Global debt-to-GDP has been trending up for many years; the pandemic simply exacerbated the rise,” the report reads.
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Despite mounting debt and a series of defaults over the coming year, the S&P doesn’t expect a major crisis any time soon.
“The projected 14-percent surge in global debt-to-GDP in 2020 is unlikely to cause a near-term debt crisis, provided economies recover, vaccines are widely distributed, interest rates remain very low, and borrowing behavior moderates,” the agency said.
The global debt-to-GDP ratio will reportedly ease back to 256 percent within two years, as soon as the world economy gets back on its feet after the pandemic.
“We expect the debt growth of corporates, governments, and household to ease as they tend to after recessions,” the report reads.
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