Animated Chart: Global Debt Projections
Total global debt stands at nearly $305 trillion as of the first quarter of 2023.
Over the next five years, it is projected to jump even further—raising concerns about government leverage in a high interest rate and slower growth environment.
As global debt continues to climb, this animated graphic shows data and projections for public debt-to-GDP ratios using the World Economic Outlook (April 2023 update) from the IMF.
Growing Global Debt Projections
After rising steadily for years, government debt first ballooned to almost 100% of GDP in 2020. While this ratio has fallen amid an economic rebound and high inflation in 2021 and 2022, it is projected to regain ground and continue climbing.
World government debt is now projected to rise to 99.5% of GDP by 2027. Here’s data going back to 2005, as well as the forecast for global public debt-to-GDP:
|Year||🇺🇸 U.S.||🇨🇳 China||🌎 Global Average|
Debt sharply increased in both 2020 and 2009 in conjunction with economic downturns. Historically, debt levels compared to GDP tend to increase as little as 4% and much as 15% in the five years after a global recession has ended.
In the U.S., public debt-to-GDP is set to reach a record 134% by 2027. The sharp rise in interest rates is increasing net debt servicing costs, which stood at $475 billion last year. Over the next 10 years, net interest costs on U.S. debt are projected to total $10.6 trillion.
China’s debt has also risen rapidly, and is projected to eclipse 100% by 2026. Public debt as a percentage of GDP is forecast to jump fourfold between 2005 and 2027. This year alone, new government debt issuance is projected to hit record levels. A large portion of this debt consists of infrastructure bonds that are focused on boosting the economy.
Comparing Trends Across Global Economies
Below, we show how the public debt-to-GDP ratios for advanced economies compare with emerging markets and low-income countries. Both the U.S. and China are excluded here:
|Year||Advanced Economies||Emerging Markets||Low-Income
In a retreat from 2020 highs, public debt is projected to fall meaningfully compared to GDP by 2027 for advanced economies excluding America. Emerging markets are also projected to see this leverage ratio decline.
Low-income countries have smaller debt levels compared to output, which is expected to continue over the next five years. Despite this, 39 of these countries are in debt distress—or are close to it—as high interest rates add pressure to government balance sheets.
Are High Global Debt Levels Sustainable?
The good news is that 60% of economies are forecast to see their public debt-to-GDP ratios fall below COVID-19 peaks by 2027.
On the other hand, many large advanced and emerging economies, including China, Brazil, Japan, and Türkiye are projected to face steeper debt. In the U.S., payments on public debt have soared to record levels due to rising interest rates.
This comes as aging populations, slower economic growth, and healthcare costs are straining government spending, a trend seen across many advanced economies.
Countries with economic growth rising faster than real interest rates may be more likely to sustain high debt levels. But sticky inflation, prompting higher interest rates, will likely make these debt piles even more fragile.
Visualized: U.S. Corporate Bankruptcies On the Rise
In 2023, over 400 companies have folded. This graphic shows how corporate bankruptcies are growing at the second-fastest rate since 2010.
Visualized: U.S. Corporate Bankruptcies on the Rise
In March, Silicon Valley Bank collapsed, plunging its parent company SVB Financial Group into bankruptcy a week later.
While many expected a wave of bank failures to follow, much of this has since been averted—but cracks have begun to emerge with Moody’s recent downgrading of 10 small and mid-sized banks.
Across the wider corporate landscape, bankruptcies have begun to tick higher. Overstretched balance sheets coupled with 11 interest rate hikes since last year have added to mounting challenges for companies across many sectors.
This graphic shows the surge in corporate bankruptcies in 2023 based on data from S&P Global.
U.S. Corporate Bankruptcies Grow
So far in 2023, over 400 corporations have gone under. Corporate bankruptcies are rising at the fastest pace since 2010 (barring the pandemic), and are double the level seen this time last year.
Below, we show trends in corporate casualties with data as of July 31, 2023:
|Year of Filing||Bankruptcy Filings|
as of July
Represents public or private companies with public debt where either assets or liabilities are greater than or equal to $2 million, or private companies where assets or liabilities are greater than or equal to $10 million at time of bankruptcy.
Firms in the consumer discretionary and industrial sectors have seen the most bankruptcies, based on available data. Historically, both sectors carry significant debt on their balance sheets compared to other sectors, putting them at higher risk in a rising rate environment.
Overall, U.S. corporate interest costs have increased 22% annually compared to the first quarter of 2021. These additional costs, combined with higher wages, energy, and materials, among others, mean that companies may be under greater pressure to cut costs, restructure their debt, or in the worst case, fold.
This year, 16 companies with over $1 billion in liabilities have filed for bankruptcy. Among the most notable are retail chain Bed Bath & Beyond and the parent company of Silicon Valley Bank.
|Party City||Consumer Discretionary||Jan 2023|
|Serta Simmons Bedding||Consumer Discretionary||Jan 2023|
|Avaya||Information Technology||Feb 2023|
|Diamond Sports||Communication Services||Mar 2023|
|SVB Financial||Financials||Mar 2023|
|LTL Management||N/A||Apr 2023|
|Bed Bath & Beyond||Consumer Discretionary||Apr 2023|
|Whittaker, Clark & Daniels||N/A||Apr 2023|
|Kidde-Fenwal||Consumer Discretionary||May 2023|
|Envision Healthcare||Healthcare||May 2023|
|Wesco Aircraft||Industrials||Jun 2023|
|PGX Holdings||Industrials||Jun 2023|
|Cyxtera||Information Technology||Jun 2023|
|Voyager Aviation||Industrials||Jul 2023|
Mattress giant Serta Simmons filed for bankruptcy early this year. It once made up nearly 20% of bedding sales in America. With a vast share of debt coming due this year, the company was unable to make payments due to higher borrowing costs.
What Comes Next?
In many ways, U.S. corporations have been resilient despite the sharp rise in borrowing costs and economic uncertainty.
This can be explained in part by stronger than anticipated profits seen in 2022. While some companies have cut costs, others have hiked prices in an inflationary environment, creating buffers for rising interest payments. Still, S&P 500 earnings have begun to slow this year, falling over 5% in the second quarter compared to last year.
Secondly, the structure of corporate debt is much different than before the global financial crash. Many companies locked in fixed-rate debt over longer periods after the crisis. Today, roughly 72% of rated U.S. corporate debt has fixed rates.
At the same time, banks are getting more creative with their lending structures when companies get into trouble. There has been a record “extend and amend” activity for certain types of corporate bonds. This debt restructuring is enabling companies to keep operating.
The bad news is that corporate debt swelled during the pandemic, and eventually this debt will come due likely at much higher costs and with more severe consequences.
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