Falling interest rates are driving a rash of borrowing across economies worldwide
Over the past year, Canada was among the most developed nations with the largest increases in their debt levels, according to a report by Institute of International Finance.
The first quarter of the year saw a surge of borrowing worldwide amid falling interest rates, pushing global debt stock up by US$3 trillion.
In developed nations, the Q1 2019 upward swell was mainly propelled by expanding government debt, adding approximately another US$1 trillion to the global total.
The most significant increases in debt-to-GDP ratio in 2018 were observed in Canada, Finland, and Japan. The Ottawa-based global economic analysis organization CEIC Data reported that as of March this year, Canada’s government debt represented 53% of the nation’s GDP.
On the other end of the spectrum, several Euro area economies like Ireland, Portugal, and the Netherlands are continuing to deleverage.
Other nations with fast-growing debt-to-GDP ratios over the past year were Brazil, Chile, China, Korea, Pakistan, and South Africa, the IIF stated.
“The persistent economy-wide increase in EM borrowing continues to feed into higher contingent liabilities for many sovereigns,” IIF deputy director Emre Tiftik explained in a statement, as quoted by Reuters.
“Growing reliance on short-term debt leaves many emerging markets exposed to sudden shifts in global risk appetite,” he added, noting that debt across developing economies ended up at US$69.1 trillion last year, from US$68.9 trillion in 2017.