Debt
Chart: Debt-to-GDP Continues to Rise Around the World
Chart: Debt-to-GDP Continues to Rise Around the World
With vaccines slowly obtaining approval in various countries, the world may finally be on the path to overcoming the COVID-19 pandemic.
The economic situation, on the other hand, is unlikely to improve anytime soon. Falling revenues combined with costly pandemic relief measures have increased global debt by $20 trillion since the third quarter of 2019. By the end of 2020, economists expect global debt to reach $277 trillion, or 365% of world GDP.
Today’s chart uses data from the Institute of International Finance (IIF) to provide an overview of where debt, relative to GDP, has increased the most.
Comparing Developed and Emerging Markets
Developed economies represent four of the five countries seeing the largest increases in debt-to-GDP, but looking from a more macro angle reveals that debt levels are rising at a similar pace around the world.
Q3 2019 ($ trillions) | Q3 2020 ($ trillions) | % Increase | |
---|---|---|---|
Developed markets | $181.8 | $196.3 | 8.0% |
Emerging markets | $70.9 | $76.4 | 7.7% |
Global total | $252.7 | $272.7 | 7.9% |
Source: IIF, BIS, IMF, Haver, National Sources
To put these figures into perspective, economists often use the debt-to-GDP metric, which compares a country’s debt to its economic output. As the name implies, it’s calculated by taking a country’s total debts and dividing them by its annual GDP. Having a low debt-to-GDP ratio suggests that a country will have little issues paying off its debts, while a high ratio can be interpreted as a sign of higher default risk.
The actual definition of a “low” or “high” ratio is quite loose, though the World Bank believes there is a threshold for government debt at 77% of GDP. Every percentage point beyond this threshold has been found to detract 0.017 percentage points from annual growth.
Comparing Debt-to-GDP by Sector
To see how COVID-19 has affected the global economy since Q3 2019, let’s take a look at each sector’s debt as a percentage of GDP.
Households (Q3 '19) | Households (Q3 '20) | Non-financials* (Q3 '19) | Non-financials* (Q3 '20) | Government (Q3 '19) | Government (Q3 '20) | |
---|---|---|---|---|---|---|
Developed markets average | 72% | 78% | 91% | 102% | 110% | 131% |
U.S. | 74% | 81% | 75% | 88% | 102% | 127% |
Euro Area | 58% | 61% | 108% | 114% | 102% | 115% |
UK | 84% | 88% | 73% | 78% | 110% | 130% |
Emerging markets average | 40% | 44% | 93% | 104% | 53% | 60% |
China | 54% | 60% | 150% | 166% | 53% | 63% |
Russia | 19% | 23% | 78% | 91% | 15% | 18% |
Global total | 60% | 65% | 92% | 103% | 89% | 105% |
*Corporations that are not in the financial industry.
Source: IIF, BIS, Haver, National Sources
Within developed markets, government debt-to-GDP grew by 21 percentage points compared to 11 for non-financial corporates, and 6 for households. This is unsurprising as governments have supplied billions (or in some cases, trillions) of economic stimulus while also pulling in less tax revenue.
The story in emerging markets is slightly different, with non-financial corporates experiencing the largest increase at 11 percentage points. The sector’s debt is now at 104% of GDP, making it the most highly-leveraged in the region.
Highlights from Today’s Chart
Today’s chart boils this data down to the individual country level, allowing us to identify two outliers: Canada and Australia.
Excluding the financial sector, Canada’s debt-to-GDP ratio increased by nearly 80%, the highest of any developed country. Government borrowing surged as the Canada Emergency Response Benefit (CERB), which provided struggling Canadians with roughly $1,500 a month, rang up a bill of $60 billion over 7 months.
An increase in debt wasn’t the only reason for the country’s worsening debt-to-GDP ratios. In Q2 2020, Canada’s GDP declined at an annualized rate of 38%, its worst three-month performance on record.
Australia was another outlier, but for a different reason; the country’s household debt decreased by almost 5% relative to GDP. This was likely due to an early-access scheme that allowed millions of Australians to make withdrawals from their superannuation, a social security fund similar to America’s 401(k).
We know that almost 60 per cent of those accessing their [superannuation] early have used it…to meet essential day-to-day expenses, including paying down debts.
—Josh Frydenberg, Treasurer of the Commonwealth of Australia
Officials have exercised caution around the prolonged use of these programs, as superannuation funds are meant to support people through retirement. Of the 2.6 million Australians that accessed their superannuations early, 500,000 are believed to have completely emptied their accounts.
Debt-to-GDP is Set to Fall…Or is it?
A global roll out of COVID-19 vaccines is likely to end the ongoing health crisis and allow the economy to return to pre-pandemic levels, though delays are to be expected.
Regardless, this spells good news for governments and financial institutions around the world—economic output will recover, shrinking debt-to-GDP ratios. Whether or not borrowing will also slow down, however, is much harder to predict.
Government borrowing has been relied on to stimulate growth since 2008, and with 75% of Americans in favor of a second COVID-19 relief bill, public debt is likely to accumulate further. Private sector debt is following a similar trend, with non-financial U.S. corporations owing $10.9 trillion as of Q2 2020, up from $6.4 trillion at the start of 2008.
These growing debts have been manageable thanks to an extended period of low interest rates and loose monetary policy, but whether or not this is sustainable remains to be seen.
Money
Mapping Credit Card Delinquency Rates in the U.S. by State
Which states have the lowest credit card delinquency rates in America, and which have the highest?
Credit Card Delinquency Rates in the U.S. by State
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
Credit card debt carries a hefty bill in America, and falling behind on payments can be extremely costly for cardholders.
This graphic shows credit card delinquency rates across 50 U.S. states, as of Q3 2023. This data comes from a WalletHub study published in January 2024.
Which States Have the Lowest and Highest Delinquency Rates?
Credit card delinquency is when a cardholder falls behind on required monthly payments. Credit agencies are often notified after two months of delinquent payments.
WalletHub examined proprietary user data on the average number of delinquent credit card tradelines—also known as credit accounts—across states. Here they are from lowest to highest:
Rank | State | Share of Credit Card Tradelines Delinquent (%) |
---|---|---|
1 | Iowa | 12.9 |
2 | Massachusetts | 13.9 |
3 | Hawaii | 13.9 |
4 | Rhode Island | 14.7 |
5 | Washington | 14.7 |
6 | Florida | 14.8 |
7 | New York | 14.9 |
8 | California | 15.1 |
9 | New Hampshire | 15.5 |
10 | Alaska | 15.6 |
11 | New Jersey | 15.6 |
12 | Colorado | 15.7 |
13 | Utah | 15.8 |
14 | Vermont | 16.1 |
15 | Montana | 16.1 |
16 | Illinois | 16.5 |
17 | Oregon | 16.6 |
18 | Idaho | 17.0 |
19 | Ohio | 17.5 |
20 | Connecticut | 17.8 |
21 | Maine | 18.0 |
22 | Nebraska | 18.1 |
23 | Wyoming | 18.1 |
24 | Maryland | 18.4 |
25 | Kansas | 18.4 |
26 | Wisconsin | 18.5 |
27 | Virginia | 18.7 |
28 | Nevada | 19.1 |
29 | South Dakota | 19.3 |
30 | Arizona | 19.8 |
31 | Minnesota | 19.8 |
32 | Pennsylvania | 20.2 |
33 | Michigan | 20.9 |
34 | North Dakota | 21.3 |
35 | Delaware | 21.4 |
36 | Missouri | 22.4 |
37 | New Mexico | 22.6 |
38 | Georgia | 23.1 |
39 | North Carolina | 24.0 |
40 | Indiana | 24.3 |
41 | Texas | 24.7 |
42 | West Virginia | 25.2 |
43 | Tennessee | 26.2 |
44 | South Carolina | 26.9 |
45 | Kentucky | 27.6 |
46 | Oklahoma | 28.2 |
47 | Arkansas | 30.1 |
48 | Alabama | 30.5 |
49 | Louisiana | 31.7 |
50 | Mississippi | 39.1 |
No state had credit delinquency rates of less than 10%, with Iowa coming the closest at 12.9%.
That puts Iowa ahead of wealthier states like Massachusetts (13.9%), Washington (14.7%), and New Hampshire (15.5%).
At the bottom end was Mississippi, which had 39% credit delinquency rates to end 2023. That’s well ahead of the next-lowest states Louisiana (31.7%) and Alabama (30.5%).
It’s notable that the American South had higher rates of delinquency almost across the board. The five states with the highest rates of credit card delinquency are all located in the southeastern region of the country, and Texas had a higher delinquency rate (25%) than other majorly populated states like Florida (14.8%) and New York (14.9%).
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