In developed and emerging economies, national debt burdens have increase majorly during the last decades as seen in IMF data. As our graphic shows, some countries were quicker than others to pile on the debt, but debt growth outpacing GDP growth is a common thread for many nations.
With economic development having been speedy in the country, China stands out for exceptionally fast debt growth during the time period.
While conventional wisdom sees debt that grows faster than GDP as a threat to the future (when debt servicing and interest are become an ever-growing burden), the lack of economic contractions many countries have seen between 2009 and 2020 had many believe that the growing debt wasn’t so bad after all. Despite this, economists do believe that outsized debt burdens hamper the productivity of economies and actually weaken the growth that happens during periods of expansion.
With the world economy having taken a major hit due to the coronavirus pandemic, debt burdens are poised to have another growth spurt. Adverse events have in the past caused countries to take on debt more quickly, as illustrated by the examples of Greece and Japan. Both countries experienced additional crises – the Euro stability crisis and the 1990 assets bubble, respectively – which caused their national debts to balloon even more than elsewhere.