The financial and economic crisis began in 2007, when home buyers in the US could not pay their mortgages and burst a huge bubble of real estate loans. Now about the next big debt crisis to come from emerging markets, company warns the World Bank in its latest economic forecast, the Global Economic Prospects.
have since 2010 there in widely into debt and strongly driven their liabilities in a short time in the air. High investment and historically low interest rates have made sure that the debt of the private sector have increased on average 85 percent of the economic output of the national economy -. An increase of 14 percentage points within a few years
in some economies, the company debts have reached worrying proportions: in Malaysia, for example, they are already around 1.5 times as large as the economic performance, and in China they more than twice as large.
Although the debt hardly not grow in most countries where the companies are most deeply in debt, or more, in Hungary, for example, in Romania or the Philippines. Nevertheless, the situation remains worrying says Franziska Ohnesorge, the principal author of the report: “. As long as the level of debt is high, these countries are vulnerable that the debt is no longer growing, does not mean that the economies are less vulnerable.”
the fizzled commodities boom and its consequences
Especially as elsewhere loans: have in a smaller group of petroleum producing countries the company debt recently restarted on a larger scale. “In the commodity-exporting countries where the level of debt was relatively low before, we have seen the greatest increase in liabilities,” said Kaushik Basu, chief economist of the World Bank.
in these economies has now fizzled commodities boom businesses and households enticed to take up debt on a large scale. In some producer countries the debt rising even now to continue, although state budgets and corporate balance sheets suffer equally under the fall in oil price. This applies for example to the Gulf States
However:. In these countries, which could obtain financing primarily from the oil business previously, the company had so far hardly inflicted. ie The sharp increase comes from a low level. Nevertheless, rising debt in a time in which the proceeds of the business shrinking oil and gas, a cause for concern. Finally, the governments of the affected countries are already responding with subsidy cuts, higher taxes and together crossed Social households on the loss of revenue – while the company into debt
The possibility of an abrupt shocks
the debt situation of the emerging and developing countries would still not in itself a reason for the world Bank, to sound the alarm, says expert Ohnesorge. “The debt worries us, but it is no reason for an urgent warning.” could be dangerous debt burdens but because the world economy is in a weakened constitution anyway.
The economic experts of the Development Bank have their growth expectations for the global economy again revised downwards, and now expect only even with 2.4 percent growth this year and 2.8 percent next year. It is the lowest level since the financial crisis broke.
“In combination with the risks for the global economy that is really a cause for concern”, says economist Ohnesorge. A risk which does not appear particularly threatening at four percent growth, could be a very different risk at 2.4 percent growth. “The world economy is currently unable to cope with an abrupt shock,” warns the expert. “This growth is simply not strong enough.”
A dramatic bang is not the only possible scenario
In any case refer to world Bank economists that it has become more difficult to predict the economic development. The probability that the global economy grows as forecast in the coming year not by 2.8 per cent, but only by 1.8 percent, was 20 percent relatively high. “That would be a very low growth rate,” says Ohnesorg. “This brings us very close to the years 1975, 1988 or 2001.” In these years, the oil crisis, the stock market crash in the US and the bursting of the technology bubble had sent the world economy into a tailspin.
And potential shocks to the global economy there currently sufficient; of a possible exit of Britain from the euro zone to sudden sharp swings to the already very nervous financial markets. Only last week the OECD had warned that unexpected economic shocks could even trigger a new global recession – and had also warned of a debt crisis in the emerging markets
The debt situation can be solved considerably gentler but also; a dramatic bang is not the only possible scenario. Many debt boom would not end crisis-like, but rather leak, says Ohnesorge. “Only a third of the debt boom ends within three years with a sudden crash. In most cases, they just run out.” And then see it today with many economies with high debt levels, such as India, Malaysia and Hungary.
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