According to the latest research from the Institute of International Finance (IIF), last year's COVID-19 epidemic increased global debt by $24 trillion to a record $281 trillion, with a global debt-to-GDP ratio of more than 355%.
IIF's Global debt Monitor estimates that government aid programs accounted for half of debt growth, while global companies, banks and households increased by $5.4 trillion, $3.9 trillion and $2.6 trillion, respectively.
That means the debt-to-GDP ratio surged 35 percentage points to 355 per cent.
This increase far exceeds the increase during the global financial crisis. In 2008 and 2009, the debt-to-GDP ratio rose by 10 percentage points and 15 percentage points, respectively.
Research shows that debt growth shows no sign of stabilizing in the short term. On the back of low interest rates, borrowing levels in many countries and sectors are expected to be much higher this year than before the outbreak, although the reopening of the world's major economies should help in terms of GDP.
"We expect global government debt to increase by another $10 trillion this year, to more than $92 trillion," the IIF report said. Dwindling government aid may also be more challenging than in the wake of the financial crisis, he added.
"political and social pressures may limit the government's efforts to reduce deficits and debt, thereby undermining its ability to respond to future crises," the report said. It may also limit the adoption of policy measures to mitigate the adverse effects of climate change and the loss of natural capital. "
The data show that debt in Europe is growing particularly rapidly, with non-financial sector debt-to-GDP ratios in France, Spain and Greece rising by about 50 percentage points.
The rapid growth of debt is mainly driven by the government, especially in Greece, Spain, the United Kingdom and Canada. Switzerland is the only mature market economy country with declining debt rates in the IIF's analysis of 61 economies.
IIF also said that "the premature withdrawal of supportive government measures could mean a surge in bankruptcies and a new round of non-performing loans", but continued reliance on government support would also pose a "systemic risk" by encouraging so-called "zombie" companies to take on more debt.