Global debt grows as rates stay low

As interest rates remained close to zero and investors continued to seek safe-haven assets in sovereign and investment grade debt, the amount of debt in both developed and emerging markets grew in the first half (H1) of this year.

Institute for International Finance (IIF) research showed that global debt across households, governments, financials and non-financials rose by over $10 trillion (€8.9 trillion) during the period.

The rise was most pronounced in the non-financial corporate sector (up by $3.3 trillion to over $63 trillion) and the government sector (up by $3.3 trillion to near $59 trillion).

Total debt across mature market sectors rose by $8 trillion to over $163 trillion – or 393% of GDP. This equates to over 50 percentage points more than its level a decade ago.

Emerging market corporate debt has topped 100% of GDP in the non-financial sectors, reaching $126 trillion, said the IIF, adding that financial corporate debt-to-GDP ratios was most pronounced in China, Saudi Arabia and Poland.

Research this week from Source, an exchange-traded funds provider, showed that emerging market countries such as Indonesia and Russia had relatively lower level of debt.

IIF said that while overall debt in emerging markets is lower than in developed markets, debt per adult in emerging markets is estimated to be around $3,230 – around 60% higher than the 2010 level. China, Saudi Arabia, Thailand and Korea have witnessed the largest buildup in household debt per adult since 2010.

©2016 funds europe

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