Annual global debt growth, excluding financials, has been increasing since 2001. Even after the 2008 global financial crisis, annual global debt growth continued to increase. March 2009 was the only quarter in which annual global debt growth declined. Afterward, it continued its upward path. As of June 30, 2014, annual global debt growth has been on the decline. This raises the question: Is a global debt cycle ending?

Global Debt Growth

The Bank of International Settlements (BIS) publishes data on total credit to the non-financial sector. According to the data, total global debt, excluding financials, has grown 13.38% from the end of 2010 to the end of the third quarter of 2015, which is slightly above 2% on an annual basis. From the end of 2002 to the end of 2007, global debt increased on average by 10% per year.

Global debt, excluding financials, has not grown at an outrageous pace since the end of 2010. However, total global debt never declined significantly since the 2008 financial crisis, except in March 2009.

There appears to be some deleveraging going on as of Sept. 30, 2015. From June 30, 2014 to Sept. 30, 2015, global debt decreased by 5%. Total debt excluding financials declined every quarter during that time. Therefore, it appears the global economy is starting to deleverage.

Emerging Markets vs. Advanced Economies

Debt in emerging markets grew 63% from the end of 2010 to the end of the third quarter of 2015. In comparison, debt in the euro zone decreased by 4% over that same time period. Advanced economy debt has grown 1.68% over that same time period. Total non-financial sector debt for advanced economies has slowed down significantly since the 2008 global financial crisis. However, emerging market debt has increased significantly.


From 2010 to the end of the third quarter of 2015, China's total debt excluding financials has increased 124%. This is not out of the ordinary for China. Total debt has basically doubled every five years since 1995. China's total debt is still growing, but it is growing at a slower pace. On average, China's total debt excluding financials has grown at a rate of 20% per year. As of the third quarter of 2015, China's total debt growth is running at 10% per year.

Corporate and Household Debt

Total debt growth among households (consumers debt) and corporations from 2010 to the end of the third quarter of 2015 has grown very differently for the advanced economies than the emerging market economies. Household debt has decreased by 6% over that same time period for the advanced economies, but it has grown by 60% for emerging market economies. Corporate debt, excluding financials, has decreased by 2% for the advanced economies from 2010 to 2015, while corporate debt has increased 80% for emerging market corporations over the same period.

Government Debt

Both advanced economies and emerging market economies have experienced increased government or federal debt from 2010 to 2015. This is not a surprise, as governments around the world have been supplying credit at low interest rates.

Emerging Market Debt Problem

There has been a significant increase in debt in the emerging market economies. From 2002 to 2007, advanced economies took on a lot of debt. From 2010 to 2015, emerging market countries have also taken on a lot of debt. If there is any crisis related to debt deleveraging, it is likely to stem from China and the other emerging market economies, where the heart of the debt problem lies. Central bank policies probably play a role in the debt creation among emerging market economies. As of 2015, there appear to be some signs of emerging market economies deleveraging, but not a rapid pace yet. It would be wise to track the amount of debt deleveraging going on in the emerging market economies.

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