Global economy struggles amid inflation, pandemic aftershocks and war
Washington PostJun 07, 2023
The Facts
Global debt reached a record $307T in the second quarter of 2023, the Institute of International Finance (IIF) said on Tuesday.
The group representing the world's largest international banks and financial institutions reported that global debt in dollar terms had risen by $10T in the first half of the year and by $100T over the past decade.
The Spin
Narrative A
Rising debt has been a global concern for a while, and has become a more urgent one since the outbreak of the pandemic in 2019. A high debt-to-GDP ratio reduces space for fresh investment as more funds are directed toward debt-servicing, which hampers growth. Country-level structural reforms and international cooperation in taxation are required to help ease national finances.
Narrative B
While concerns over rising global debt must be paid heed to, it should also be noted that the effect of debt varies among nations, meaning that adjustment costs can vary. At the macro level, consumer debt remains largely manageable; central banks have retained some wriggle room and markets shouldn't be overly spooked.