| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy


Finfacts changes from 2015

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate

 

Feedback

 

Content Management by interactivetools.com.

News : Global Economy Last Updated: Feb 10, 2015 - 7:18 AM


Global debt has risen $57tn or 17% of world GDP since 2007
By Michael Hennigan, Finfacts founder and editor
Feb 5, 2015 - 8:35 AM

Email this article
 Printer friendly page

Global debt has risen $57tn or 17% of world GDP since 2007 and rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to economic output than they did in the year of the outbreak of the subprime mortgage crisis and the global credit crunch.

McKinsey Global Institute says in the third report in a series on debt and deleveraging, that expectations that the worst recessions since the Great Depression of the 1930s, would spur widespread “deleveraging” to safer levels of indebtedness were misplaced. The report calls for “fresh approaches” to preventing future debt crises.

OECD data show that real world GDP growth is up 121% since the end of 2007 and the 17% rise in debt since the crisis This is not compares with a 23-point increase in the seven years before the crisis.

China’s debt has quadrupled since 2007. Fueled by property and shadow banking, China’s total debt has nearly quadrupled, rising to $28tn by mid-2014, from $7tn in 2007. At 282% of GDP, China’s debt as a share of GDP, while manageable, is larger than that of the United States or Germany.

MGI says that as it appears, economies need ever-larger amounts of debt to grow, and deleveraging is rare and increasingly difficult, they may also need to learn to live more safely with high debt. That will require new approaches to manage and monitor it, to reduce the risk of crises, and to resolve private-sector defaults efficiently. Policy makers will need to consider more ways to reduce government debt, and it may be time to reevaluate how incentives in the tax system encourage the amassing of debt.

When there are signs of credit bubbles, regulators can seek to cool markets with countercyclical measures, such as tighter loan-to-value rules and higher capital requirements for banks. "Debt undoubtedly remains an essential tool for financing economic growth. But how it is created, used, monitored, and (when necessary) discharged still needs improvement."

Developing economies have accounted for 47% of all the growth in global debt since 2007—and three quarters of new debt in the household and corporate sectors. The MGI report says that to some extent, this reflects "healthy financial system deepening, as more households and companies gain access
to financial services. "Moreover, debt in developing countries remains relatively modest, averaging 121% of GDP, compared with 280% for advanced economies. There are exceptions, notably China, Malaysia, and Thailand, whose debt levels are now at the level of some advanced economies."

Only in the core crisis countries—Ireland, Spain, the United Kingdom, and the United States—have households deleveraged. In many others, household debt-to-income ratios have continued to rise. They exceed the peak levels in the crisis countries before 2008 in some cases, including such advanced economies as Australia, Canada, Denmark, Sweden, and the Netherlands, as well as Malaysia, South Korea, and Thailand.

Since 2007, government debt has grown by $25tn. It will continue to rise in many countries, given current economic fundamentals. Some of this debt, incurred with the encouragement of world leaders to finance bailouts and stimulus programs, stems from the crisis. Debt also rose as a result of the recession and the weak recovery.

Ireland: McKinsey not as sanguine as Noonan on debt sustainability

The report examines the evolution of debt across 47 countries—22 advanced and 25 developing—and assesses the implications of higher leverage in the global economy and in specific sectors and countries. The analysis, which follows our July 2011 report Debt and deleveraging: The global credit bubble and its economic consequences and our January 2012 report Debt and deleveraging: Uneven progress on the path to growth, focuses on the debt of the “real economy”: governments, nonfinancial corporations, and households. It finds that debt-to-GDP ratios have risen in all 22 advanced economies in the sample, by more than 50%age points in many cases.

Related Articles


© Copyright 2015 by Finfacts.ie

Top of Page

Global Economy
Latest Headlines
Strong Swiss franc gloom deepens for exporters
Global investors shift focus to China; EM outflows surge to $1tn in 13 months
Global oil glut will continue into 2016
Stable growth momentum in OECD area but slowing expected in China
Prices for major food commodities in July lowest since September 2009
Global manufacturing in July weakest level in two years
US, China and UK lead top 25 target countries for foreign direct investment
Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years
Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place
Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105
Western consumer groups under pressure in China and India
Developing countries facing “structural slowdown” likely to last for years
OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties
Emerging Markets Index falls to 12-month low in May as manufacturing contracts
US and world economies slowing in 2015 — OECD
Global manufacturing production rose slightly in May; Trade flows weak
GDP growth in OECD area slowed to 0.3% in the first quarter of 2015
Only one quarter of workers worldwide have stable employment contracts
Automatic Exchange of Tax Information: OECD says countries won't be able to game system
Gates Foundation loses in Swiss family's shares coup
Minimum wage levels in OECD countries
Brent oil benchmark over $68 a barrel - up almost 50% in 2015
Global growth slows and manufacturing dips to 21-month low
Family-controlled firms dominate European business
Top 10 of world’s 250 largest consumer products companies account for 30% of sales
Nine of world's 20 fastest growing economies in Africa
Globalisation maybe stalling as trade growth remains weak
Global growth prospects uneven across major economies says IMF
Emerging markets growth lowest since 2009; Global growth at 30-year average
China's economic rebalancing hitting Latin American economies
New York, London, HK & Singapore top global financial centres index; Dublin recovers
Global growth in modest expansion from low oil prices/ monetary easing says OECD
Composite leading indicators point to positive change in growth momentum in the Eurozone
Global labour market trends portend paradise for some but uncertainty for many workers
Vienna remains top of World Quality of Living Rankings in 2015; Dublin at 34
Zurich and Geneva overtake Singapore to become world's most expensive cities
HSBC Switzerland and Falciani: How it happened
Global economic power to continue shift from advanced economies
Global food price index falls in January; Cereal output set for record
Global debt has risen $57tn or 17% of world GDP since 2007