‘No way to go but up’ isn’t a good thing at all, particularly where debt is concerned. According to the International Monetary Fund (IMF), world debt is now deeper by 12 percent of GDP than it was at the peak of the financial crisis in 2009. The debt build-up is a consequence of the economic collapse of the 2008 financial crisis, and the response to it. Other contributing factors include the effects of the 2014 commodities price crash, and the rapid spending growth in emerging markets and low-income developing countries. Swelling debt will invariably make it harder for countries to pay off debts when financing conditions tighten. or respond adequately to the next recession.
Global debt is reported by Fiscal Monitor to be at a historical high, reaching a level of 225 percent of GDP. China the “driving force” behind the new debt levels since the worldwide financial crisis, is said to account for nearly a three-quarter upsurge of private debt, while Japan and the US account for over half of the global debt.
“One hundred and sixty-four trillion is a huge number. When we talk about the risks looming on the horizon, one of the risks has to do with the high level of public and private debt,” said Vitor Gaspar, IMF’s department head of fiscal affairs.
19 countries have either reached or far surpassed their debt ceilings this year, according to IMF. In 2017, over a third of advanced economies had debt above 85 percent of GDP, a number three times higher than in Year 2000. IMF said countries should act decisively to rebuild their fiscal buffers so they could spend more when times are hard and the US should recalibrate its fiscal policy so government debt-to-GDP levels decline over the medium term. Us budget deficit is expected to surpass $1 trillion by 2020.