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World burdened by rising mountain of debt; Thailand tops SE Asia list for household debts

World burdened by rising mountain of debt; Thailand tops SE Asia list for household debts

Global debt levels hit a new record high of US$313 trillion in 2023, while Thailand’s household debt jumped to 91.6% of its GDP in the fourth quarter of last year, a recent report said.

In the “Global Debt Monitor” report released on Wednesday, the Institute of International Finance (IIF) said that more than $15 trillion (538 trillion baht) was added to the “mountain of global debt” last year, bringing the total to a new record high of $313 trillion.

It said the debt-to-GDP ratio in emerging markets reached new highs last year, with the highest surges observed in India, Argentina, China, Russia, Malaysia, and Saudi Arabia.

According to the report, the appetite for borrowing is growing this year, especially in emerging markets, as international sovereign bond issuance volumes rise.

“Of particular concern: Deepening geoeconomic fragmentation, geopolitical conflicts and rising trade protectionism may lead to more frequent and abrupt changes in global risk sentiment. Any escalation of these risks could exacerbate debt vulnerabilities,” the IIF report warned.

It said that government budget deficits were still running well above pre-pandemic levels, and an acceleration in regional conflicts could trigger an abrupt surge in defence spending.
 

According to the IIF report, Thailand’s household debt as of the fourth quarter of 2023, stood at 91.6% of the country’s gross domestic product (GDP), or nearly equal to the entire economy. This was the highest household debt ratio among Southeast Asian countries. The total debt of Thailand’s non-financial corporates came in at 86.2%, while government debt (excluding state enterprises) amounted to 54.2% of GDP and the financial sector 32.8%.

The report also warned that with interest rate cuts by the US Federal Reserve on the horizon, uncertainty surrounding the trajectory of US policy rates and the US dollar could further increase market volatility and induce tighter funding conditions for countries with relatively high reliance on external borrowing.

The IIF also voiced concern over the potential revival of inflationary pressures, which could result in higher borrowing costs.

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