Global Gov't Debt Rises $13T During Pandemic: Moody's

Global outstanding government debt grew around $13 trillion in 2020 during the pandemic, carrying the total to over $83 trillion, due to increased spending to combat the virus, and protect households and businesses from economic disaster, according to Moody's on Tuesday.

"The coronavirus pandemic led to an unprecedented surge in government debt levels," William Foster, a vice president in Moody's Sovereign Risk Group in New York, told during a podcast -- Moody's Talks - The Big Picture: COVID has pushed government debt to new heights. Now what?

"Even before the pandemic, government debt levels have been climbing for a decade," Foster said, noting that they rose from $35 trillion to $50 trillion during the global financial crisis of 2008.

He said the global government debt increased by 2.5 times from 2007 to 2020, stressing the trend will continue to pace towards 2021, adding: "For the first time in decades, governments will surpass non-financial corporates as the sector with the largest outstanding debt burden globally."

Richard Cantor, Moody's chief credit officer at New York, said most of the rise in government debt during the pandemic is unlikely to be reduced over the next few years.

"We normally see political resistance to any increase in taxes or reduction in spending, but there is an added reason why politicians have been less aggressive in trying to reduce public debt in recent years," he said.

"And, that is because they haven't felt any pressure from the capital markets to do so," he noted, adding: "Saving rates have been rising across the aging population in the developed world, the demand for bonds has been growing more than the supply, as the interest rates have been trending down."

Marie Diron, a managing director at Sovereign Risk Group in London, said both the governments and financial markets have learned to live with higher debt levels over many decades, and that gives flexibility to governments on how to manage their budgets.

She said the flexibility also provides governments with how to manage their budgets and in long-term projects such as climate change and social inequality.

Diron stressed that some factors during the pandemic showed differences between advanced economies and emerging markets.

"For advanced economies, the jump in debt has been essentially driven by their additional spending during the pandemic to support the economy, while emerging markets have not been able to go on with that spending," she explained. -