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Growth of global corporate debt

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Global debt substantially increased after the 2008-09 global financial crisis (GFC), amounting to more than three times world GDP in 2018. Nonfinancial corporate debt was a main contributor to this expansion.

Practitioners and academics have increasingly raised concerns that the larger firm indebtedness could become a threat to the global economy and trigger a financial crisis comparable to the GFC. The COVID-19 pandemic has only heightened these fears. As lockdowns and border closures have caused a plunge in global economic activity, how firms manage their debt burden has become a central topic in economic discussions. High corporate debt could become the Achilles heel in the global economy that exacerbates the downturn and hampers economic recovery.

In a new paper, we show that the rise in corporate debt was concentrated in emerging economies. Between 2008 and 2018, nonfinancial corporate debt rose from 56 to 96 percent of GDP in these economies, whereas it grew at the same rate as GDP in developed ones (Figure 1). This rise in corporate debt was mainly conducted through bond markets and it has been largely attributed to accommodative monetary policies in developed economies.

Figure 1: Corporate Debt Outstanding

Line graph illustrating Corporate Debt Outstanding

Note: This figure shows the aggregate levels of nonfinancial corporate debt as a percentage of GDP during 2008-2018. Nonfinancial corporate debt refers to all liabilities (loans, bonds, and other claims) issued domestically and abroad by firms that produce market goods and nonfinancial services, as defined by the BIS.
Source: Abraham et al. (2020).

Although the growth in debt financing has some positive aspects for emerging market firms in terms of expanding and diversifying financing sources, it also amplified solvency risks and firms’ exposure to changes in market conditions. Slower economic growth worldwide as a result of the COVID-19 pandemic could impose significant costs to emerging market firms that increased reliance on debt financing.  In several emerging economies, the share of nonfinancial corporate debt held by firms with high risk of financial distress could become similar or even surpass values recorded at the onset of the Asian financial crisis.

Policy makers in emerging economies face challenges to mitigate overall risks and contain corporate vulnerability in the nonfinancial sector. Because capital markets have an important role in the expansion of financial activity and are not as regulated as banks, policy makers have limited tools to alleviate the risks of growing nonfinancial corporate debt. 


Abraham, F., J.J. Cortina, and S.L. Schmukler. 2020. “Growth of Global Corporate Debt: Main Facts and Policy Challenges.” World Bank Policy Research Working Paper 9394. Forthcoming in Oxford Research Encyclopedia of Economics and Finance.


Sergio Schmukler

Research Manager, Development Research Group, World Bank

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