Global debt levels have reached new heights. A report by McKinsey Global Institute has estimated that the world’s debt now amounts to a total of $199 trillion. With a global population of about 7.2 billion that is around $27,638 per person.
The research has found that over the past eight years, government debts have increased by $57 trillion and currently amounts to $199 trillion. In contrast, back in 2007, the global debt was valued at $142 trillion and in 2000 – at just $87 trillion. It is estimated that every of the world’s big economies has recorded a higher level of borrowing relative to GDP compared to the months before the Great Recession and the financial crisis.
What does this mean? According to McKinsey’s experts, such debt rates hide a number of risks for economies. The greatest of them is that government debts may continue to increase, especially if economies continue to follow the current economic fundamental.
Many people forget that any government debt directly affects the debt rates of both households and corporations. Therefore, it is not surprising that the research has also discovered that the levels of household debt have also jumped. That, is already seen in a number of countries in Asia and Northern Europe.
Even the United Arab Emirates has been affected by the global jump of government debt. According to one recent survey, over 25% of UAE’s population is living in debt. The same research has found that almost 20% of people living in the United Arab Emirates have made late payment at least once in the past one year or have completely missed to make one. Nearly 6% of the people who took part in the survey share that they have frequently defaulted on their loans.
Debt levels have greatly increased even in advanced economies like South Korea, Australia, the Netherlands, Denmark, Sweden, Thailand, Canada and Malaysia. Even more shocking is the case with China’s debt, which has quadrupled since 2007.
The research explains that there are a number of key factors that have brought on this rising debt tendency. The recession takes a lot of the blame, as well as economies’ weak and slow recovery from it. In addition to that, the financing of countless stimulus programs and bailouts has also taken its toll.
The study predicts that government debt will continue to rise. It also advices governments to take on new approaches, like one-time taxes on wealth, asset sales that are more extensive and better debt-restructuring programs.