Global debt surge threatens economic stability: Report

Global debt markets, pivotal in the recovery from the 2008 financial crisis and the Covid-19 pandemic, are facing escalating challenges amid a confluence of high borrowing costs, slowing economic growth, and heightened geopolitical uncertainties, according to a recent report by the Organisation for Economic Co-operation and Development (OECD).  

The OECD's Global Debt Report 2025, released last Thursday (March 20),  analyses the latest trends in government and corporate debt markets worldwide, revealing a concerning trajectory of continued debt accumulation. The report highlights that government and private sector borrowing is projected to surge further in 2025, exacerbating existing vulnerabilities.  

The report makes specific mention of government bond issuance within OECD nations, which it forecasts will reach an unprecedented $17 trillion in 2025, up from $14 trillion in 2023, with a significant contribution from emerging markets and developing economies (EMDEs). The report underscores that this escalating debt burden, coupled with rising interest rates, risks severely constraining future investment capacity.  

“The rising and increasingly expensive public and private debt jeopardises the ability to finance future investments,” an OECD spokesperson said. “Governments and companies borrowed $25 trillion in 2024, a staggering $10 trillion more than pre-Covid levels and triple the amount borrowed in 2007."  
 

The OECD projects the overall central government debt-to-GDP ratio in member countries to climb to 85% by 2025, a substantial increase from 2019 and nearly double the 2007 levels. This trend, coupled with rising bond yields in key markets, is attributed to a combination of higher borrowing costs and an increase in high-risk debt.  

The report also notes a shift in the purpose of borrowing. While past borrowing was primarily aimed at mitigating economic shocks and facilitating recovery, current borrowing is increasingly driven by the need for new investments to achieve medium- and long-term policy objectives, including stimulating growth, addressing demographic challenges, and meeting defence requirements.  

OECD secretary-general Mathias Cormann emphasised the need for greater efficiency in public spending and strategic government borrowing for productivity-enhancing investments. He also urged companies to ensure private sector borrowing contributes to productive capacity.  

In EMDEs, government borrowing from debt markets has also seen a significant rise, from approximately $1 trillion in 2007 to more than $3 trillion in 2024, with China accounting for a substantial portion of this increase.
The report further highlights the growing impact of higher borrowing costs on government expenditure, with interest payments now consuming a significant portion of GDP.

Additionally, refinancing risks are mounting, with a substantial portion of public and private debt maturing within the next three years.  

Concerns are also raised about the use of private sector borrowing, which has often been directed towards financial operations such as refinancing and dividend payments, rather than productive investments.
 

In addition, central bank holdings of domestic government bonds in OECD economies have declined, while household and foreign investor holdings have increased.  

Domestically, a recent survey conducted by the Trade Policy and Strategy Office (TPSO) has revealed a nuanced picture of the nation’s debt landscape.

Poonpong Naiyanapakorn, director of the TPSO and spokesperson for the Ministry of Commerce, disclosed the results of a survey involving 6,291 respondents nationwide, indicating a slight improvement in the overall debt situation compared to 2023, with a notable reduction in informal debt.

However, Poonpong also highlighted that government employees, farmers, and private sector employees remain the occupational groups bearing the heaviest debt burdens, consistent with previous surveys. The survey also underscored a significant public demand for government intervention to alleviate the burden of high interest rates.

“While we see a marginal improvement in the overall debt picture, the persistent high debt levels among key occupational groups and the strong desire for interest rate relief signal ongoing economic pressures,” Poonpong stated.

The survey found that 50.99% of respondents reported having debt obligations, down from 62.52% in 2023. The primary drivers of debt accumulation were identified as property and vehicle purchases (27.47%), followed by regular expenses (25.56%), and investment-related debt (11.94%).