For our featured chart this week, we look at the world’s total debt load as a percentage of the world’s economy or Gross Domestic Product (GDP).  The blue line at the top of the chart represents the total amount of the world’s public and private non-financial debt relative to its GDP.  The black line in the middle of the chart represents the same measure but is based on just private debt (think corporations, households, etc.).  And the red line at the bottom represents public debt (think governments).

As you can see, both public and private debt exploded as a percentage of world GDP last year.  For roughly five years, total world debt hovered around 230% of GDP; but then 2020 came along, and it jumped to almost 260% of GDP.  In dollar terms, that equates to about $19.5 trillion in new debt added to the world economy last year.

With central banks around the world stepping in to help lower borrowing costs in their economies, countries haven’t had too hard of a time paying up for this new debt.  As total world debt skyrocketed as a percentage of world GDP in recent years, the cost of servicing that debt fell, from around 2% of GDP to 1.5%.  Going forward, however, that does mean that governments and corporations are more exposed to the risk of rising interest rates.

 

This is intended for informational purposes only and should not be used as the primary basis for an investment decision.  Consult an advisor for your personal situation.

Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.

Past performance does not guarantee future results.