Macroscope | Why the cost of buying economic growth is destined to rise – South China Morning Post

Report on Global Economic Resilience and its Implications for Sustainable Development Goals

1.0 Overview of Global Economic Stability

An assessment of the global economy indicates a superficial resilience to geopolitical and trade-related shocks. However, this stability is largely underwritten by extensive borrowing, creating a debt-fueled growth model that presents significant challenges to achieving long-term sustainable development.

• Economic growth has been maintained, albeit at a reduced rate, despite numerous global conflicts and trade disputes.
• This growth is financed by large-scale borrowing across public, corporate, and household sectors, particularly in major economies like the United States, Japan, and China.
• The reliance on debt raises critical concerns regarding the sustainability of current economic models and their alignment with the Sustainable Development Goals (SDGs), especially SDG 8 (Decent Work and Economic Growth).

2.0 Analysis of Escalating Global Debt

International financial institutions have issued heightened warnings regarding the trajectory of global debt. Data indicates an unprecedented accumulation that threatens global financial stability and the capacity to finance the 2030 Agenda for Sustainable Development.

1. The Institute of International Finance (IIF) reports that global debt reached a record US$338 trillion in the first half of 2025.
2. This figure represents an increase of over US$21 trillion, the most rapid accumulation since the fiscal response to the COVID-19 pandemic.
3. This escalating debt burden directly compromises the objectives of SDG 17 (Partnerships for the Goals), which calls for assisting countries in attaining long-term debt sustainability.

3.0 Primary Drivers of Debt and SDG Impact

Several key factors are driving the increase in sovereign and corporate debt, each with direct and adverse consequences for specific Sustainable Development Goals.

• 3.1 Increased Defence Expenditure

  A significant portion of government borrowing in advanced economies is allocated to increased defence spending. This reallocation of financial resources directly conflicts with development priorities.

  • This trend diverts public funds away from essential services, undermining progress toward SDG 1 (No Poverty), SDG 3 (Good Health and Well-being), and SDG 4 (Quality Education).
  • It also runs counter to the aims of SDG 16 (Peace, Justice and Strong Institutions) by prioritizing military investment over fostering peaceful and inclusive societies.

• 3.2 Rising Healthcare and Demographic Costs

  Governments in both advanced and emerging nations are borrowing to meet the rising costs of healthcare, exacerbated by demographic shifts. This poses a challenge to creating equitable health systems.

  • The financial pressure on public health systems complicates the universal achievement of SDG 3 (Good Health and Well-being).

• 3.3 Climate Change and Environmental Disasters

  A growing need for borrowing is linked to financing recovery from natural disasters caused by climate change. This reflects the mounting economic cost of environmental inaction.

  • This reactive spending highlights a failure to adequately address SDG 13 (Climate Action), as the financial burden of climate-related events impedes proactive investment in sustainable infrastructure and resilience.

4.0 Conclusion: Debt Unsustainability as a Barrier to the 2030 Agenda

The prevailing trend of debt accumulation is fundamentally at odds with the principles of sustainable development. The continued rise in borrowing, with no clear signs of reversal, severely limits the fiscal space available for nations to invest in the SDGs. This trajectory jeopardizes the global commitment to creating a more prosperous, equitable, and sustainable future.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 3: Good Health and Well-being – The article mentions rising healthcare spending as a significant driver of government borrowing.
• SDG 8: Decent Work and Economic Growth – The core theme is the nature of global economic growth, its reliance on debt, and its overall sustainability.
• SDG 13: Climate Action – The article explicitly links increased borrowing to the costs associated with natural disasters caused by climate change.
• SDG 16: Peace, Justice and Strong Institutions – The text points to increased defence spending, driven by physical conflicts and international tensions, as a major factor in the build-up of government debt.
• SDG 17: Partnerships for the Goals – The discussion revolves around global debt, a key issue in international finance and macroeconomic policy, which falls under this goal.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 3: Good Health and Well-being

• Target 3.8: Achieve universal health coverage, including financial risk protection. The article highlights the financial pressure on governments to fund “rising healthcare spending demands,” which is a direct challenge to creating fiscally sustainable universal health systems.

SDG 8: Decent Work and Economic Growth

• Target 8.1: Sustain per capita economic growth in accordance with national circumstances. The article questions the sustainability of current economic growth, describing it as being “‘bought’ by borrowing on a grand scale,” suggesting the current model is not sustainable in the long term.

SDG 13: Climate Action

• Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries. The article points to the financial consequences of failing to achieve this, noting that governments and companies “need to borrow more to meet the cost of natural disasters caused by climate change.”

SDG 16: Peace, Justice and Strong Institutions

• Target 16.1: Significantly reduce all forms of violence and related death rates everywhere. The article connects the “multiple ongoing physical conflicts” and the pressure to “increase defence spending” directly to the rise in government debt, showing how a lack of peace creates economic burdens that divert resources from sustainable development.

SDG 17: Partnerships for the Goals

• Target 17.4: Assist developing countries in attaining long-term debt sustainability through coordinated policies. While the article mentions debt in both advanced and emerging economies, the core issue is the unsustainable level of global debt. The warnings from the IMF and the IIF report on “Seismic Shifts in Global Debt Markets” directly relate to the need for policies that ensure debt sustainability on a global scale.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

SDG 17: Partnerships for the Goals

• Implied Indicator for Target 17.4: Total debt service as a proportion of exports of goods and services. The article provides a direct, high-level indicator of the global debt situation by stating that “global debt rose by more than US$21 trillion to a record US$338 trillion in the first half of 2025.” This figure serves as a macro-indicator of rising debt burdens, which is the central concern of Target 17.4.

SDG 3: Good Health and Well-being

• Implied Indicator for Target 3.8: Proportion of total government spending dedicated to essential health services. The article implies this indicator by discussing the need for governments to “borrow more to finance rising healthcare spending demands,” suggesting that health expenditures are a growing and significant portion of national budgets.

SDG 13: Climate Action

• Implied Indicator for Target 13.1: Direct economic loss attributed to disasters. The article directly refers to the “cost of natural disasters caused by climate change” as a reason for increased borrowing by both governments and companies. This financial cost is a direct measure of the economic impact of climate-related disasters.

SDG 16: Peace, Justice and Strong Institutions

• Implied Indicator for Target 16.1: Proportion of government expenditure on defence. The article identifies the need to “increase defence spending” as a “major factor driving the sharp and ongoing build-up in government debt.” This spending level is an indicator of resources being allocated to military activities rather than other development priorities.

4. Summary Table of SDGs, Targets, and Indicators

Source: scmp.com