Debt is considered a form of risk in the context of financial market factors. In our research, we analysed the level of global debt and structural debt of the world’s three major economies – the US, the EU and China’s. Excellent risk management is a defining condition for long-term investment success, so it is important to monitor and examine debt as well as a source of risk.
Analysis Highlights:
- Global debt reached $281 trillion in 2020 and the debt-to-GDP ratio exceeded 355%. This means that per unit of product (GDP) there are 3.55 units of debt. In the long-term perspective, the debt burden is likely to have a negative impact on GDP.
- Mature markets noticed a significant increase in government debt as the fiscal response to the COVID-19 pandemic was limited in most emerging markets. Government debt is rising above $12 trillion in 2020, a nearly three-fold increase over 2019’s growth of $4.4 trillion!
- Higher absolute debt, as well as the dynamics of debt-to-GDP growth, constitute a systemic risk factor for future economic growth and this risk must also be associated with possible insolvencies. What are the ways to reduce the debt?
