Global debt surged to record levels in the first quarter due to “widespread recessionary conditions” caused by the coronavirus pandemic, according to the Institute of International Finance.
Total debt stood at $258 trillion (Dh947.6tn), equal to 331 per cent of gross domestic product, after growing by 10 percentage points from the fourth quarter of 2019.
“While this marks the largest quarterly increase in global debt ratios on record, the actual rise in debt was only $1.2tn, well below the average quarterly rise of $2tn over 2015 to 2019. However, available data on issuance suggests that the pace of debt build-up has accelerated since March, largely reflecting the massive global fiscal and monetary response to the pandemic,” the report said.
The Covid-19 outbreak has tipped the world economy into a recession that is set to be the worst since the Great Depression, according to the International Monetary Fund.
The global economy is expected to contract by 4.9 per cent this year due to a more severe economic fallout from the pandemic.
Central banks and governments around the world have topped up their fiscal support to limit Covid-19's economic damage.
“With some $11tn in global fiscal stimulus approved and another $5tn in the pipeline, gross debt issuance hit an eye-popping record of $12.5tn in the second quarter, versus a quarterly average of $5.5tn in 2019,” the institute said.
The corporate sector accounted for more than 65 per cent of growth in the global debt-to-GDP ratio in the first quarter, the report said.
Total debt in the financial sector increased to $64tn during the first quarter, up from $8tn in 2016, while financial corporate debt grew by $12tn to reach $75.5tn, a record high at 95 per cent of GDP.
“Looking ahead, we expect the rise in corporate debt to continue at an accelerated pace. With abundant central bank liquidity, the decline in borrowing costs for corporates has already led to a substantial surge in corporate bond and loan issuance since March, amounting to [about] $4.6tn in the second quarter versus a quarterly average of $2.8tn in 2019,” IIF said.
Debt in mature markets hit 392 per cent of GDP, with Canada, France, the US and Norway recording the largest increases, the report said.
At $185tn in the first quarter of this year, total debt in mature markets is $22tn more than it was in 2016, with the US accounting for half of it.
The total debt in emerging markets also surged to more than 230 per cent of GDP in the first quarter of 2020, compared to 220 per cent in the fourth quarter of 2019, largely driven by non-financial companies in China.
However, the economies recorded a slight drop in debt levels to $72.5tn on the back of currency depreciations against the dollar.
China’s debt is on track to hit 335 per cent of GDP in the second quarter. Total debt across all sectors including household, government, financial and non-financial companies increased from 302 per cent to about 318 per cent of GDP in the first quarter.
Corporate defaults are also on the rise as companies suffer due to the measures taken to contain the coronavirus, the report said.
“With corporate earnings plunging and credit downgrades on the rise, the face value of defaulted non-financial corporate bonds jumped to a record $94bn in the second quarter of 2020.
"The US accounted for [about] 75 per cent of this, followed by the euro area [14 per cent] and China [3 per cent].”
Earlier this month, the IMF urged governments to be cautious as they borrow more money to offset the impact of the pandemic.
The fund also made $100bn in emergency financing available for low-income and emerging market countries.
“While rising debt levels will raise concerns about debt dynamics and creditworthiness, [more than] 92 per cent of government debt is still investment grade,” the IIF report said.
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
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RACE CARD AND SELECTIONS
5pm: Maiden (PA) Dh80,000 1,200m
5,30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 1,200m
6pm: The President’s Cup Listed (TB) Dh380,000 1,400m
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7.30pm: Handicap (PA) Dh80,000 1,400m
The National selections
5pm: RB Hot Spot
5.30pm: Dahess D’Arabie
6pm: Taamol
6.30pm: Rmmas
7pm: RB Seqondtonone
7.30pm: AF Mouthirah
EA Sports FC 26
Publisher: EA Sports
Consoles: PC, PlayStation 4/5, Xbox Series X/S
Rating: 3/5
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Farage on Muslim Brotherhood
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
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It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
COMPANY PROFILE
Name: Mamo Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua Based: Dubai, UAE Number of employees: 28 Sector: Financial services Investment: $9.5m Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors. The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
Trump v Khan
2016: Feud begins after Khan criticised Trump’s proposed Muslim travel ban to US
2017: Trump criticises Khan’s ‘no reason to be alarmed’ response to London Bridge terror attacks
2019: Trump calls Khan a “stone cold loser” before first state visit
2019: Trump tweets about “Khan’s Londonistan”, calling him “a national disgrace”
2022: Khan’s office attributes rise in Islamophobic abuse against the major to hostility stoked during Trump’s presidency
July 2025 During a golfing trip to Scotland, Trump calls Khan “a nasty person”
Sept 2025 Trump blames Khan for London’s “stabbings and the dirt and the filth”.
Dec 2025 Trump suggests migrants got Khan elected, calls him a “horrible, vicious, disgusting mayor”
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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