global debt crisis
The World Bank has highlighted the risk of a fresh global debt crisis after warning of the biggest buildup in borrowing in the past 50 years.
The causes of the crisis included high-risk lending and borrowing practices, burst real estate bubbles, and hefty deficit sp…
Current debt wave is largest, fastest and most broad-based since 1970s, say economistsThe World Bank has highlighted the risk of a fresh global In its half-yearly Global Economic Prospects (GEP), the Washington-based organisation said of the four waves of debt accumulation since the 1970s, the latest was the largest, fastest and most broad-based.“Low global interest rates provide only a precarious protection against financial crises,” said Ayhan Kose, a World Bank official. "Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth. We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services. More than a third of emerging and developing economies had experienced an increase in debt of at least 20 percentage points of GDP. All rights reserved. The first three waves of global debt accumulation were identified as running from 1970-1989, 1990-2001 and 2002-2009.It listed a menu of four policy options for countries to reduce the likelihood of the current global debt wave ending in crises — and, if crises were to take place, to alleviate their impact.First, the World Bank said sound debt management and debt transparency should help to reduce borrowing costs and contain fiscal risks.Second, strong monetary, exchange rate and fiscal policy frameworks could safeguard developing and emerging economies in a fragile economic environment.Third, robust financial sector regulation and supervision to recognize and tackle emerging risks.And, fourth, effective public finance management and policies that promote good corporate governance can help ensure that debt is used productively.The World Bank strengthened its global economic growth forecast to 2.5% in 2020 in the report, up from its previous projection of 2.4%, but warned downward risks were likely to persist. “The history of past waves of debt accumulation shows that these waves tend to have Total emerging and developing economy debt reached almost 170% of gross domestic product in 2018 – or $55tn (£42tn) – an increase of 54 percentage points of GDP since 2010. This, it says, is aggravating the slow-motion stagnation of global GDP growth... 32 Countries Have Unsustainable Debt.
"Low global interest rates provide only a precarious protection against financial crises," Ayhan Kose, director of the World Bank's Prospects Group, said in the report. Unfortunately, the world is sitting on a sovereign debt timebomb that could be triggered at any time by the smallest event. "The history of past waves of debt accumulation shows that these waves tend to have unhappy endings.
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