Proactive Investors - HSBC Holdings PLC (LON:HSBA) boss Noel Quinn has warned that years of government borrowing have gradually led global economies to a knife edge.
Speaking at Saudi Arabia’s Future Investment Initiative Institute’s summit, he argued rising government debt since the financial crisis and pandemic had become unsustainable.
“I’m concerned about a tipping point on fiscal deficits,” he said.
“When it comes, it will come fast and I think there are a number of economies in the world where there could be a tipping point and it will hit hard.”
His warnings echo similar concerns from the International Monetary Fund earlier this month that US and Chinese borrowing had set global public debt on course to match the world economy in size by the end of this decade.
According to the International Monetary Fund estimates, US borrowing will remain close to 7% of its gross domestic product at around US$2 trillion over the coming years.
Global debt has been rising by around 1% of GDP in recent years meanwhile, the IMF said, adding that this rate was becoming unsustainable.
Given rising interest rates by central banks in attempts to stem inflation, concern was also raised about the cost of such borrowing by governments.
According to the IMF, governments will simply have to slash spending, with economic incentives through schemes such as Joe Biden’s Inflation Reduction Act contributing.
Quinn said he believed Europe would get rampant inflation, which was largely sparked by the outbreak of war in Ukraine, under control, but added growing wages would need to be closely watched.