While governments around the world are trying to restore economic growth in many of the countries there is a new reason for concern: unsustainable debt.
Unsustainable debt fear resumed and again began to "chase" governments around the world. Even in cases where a voluntary or compulsory savings externally forced the government to abandon the incentive to fight debt that they took after the global financial crisis, excessive debt problem has not disappeared.
Reliance on unconventional monetary policy provided the infusion of large amounts of cheap money into the system to ensure the recovery of the economy. This has led to a return to levels of private debt, registered on the eve of the global financial crisis. Initially, when the government took loans for the recapitalization of banks and the rescue of the financial companies, as well as to finance the incentives in the form of increased costs or significant tax cuts, it was expected that the settlement of private debt crisis will lead to an increase in public debt.
Lending in the countries submitting reports has increased from an average of 65% of GDP in March 2008 to 89% in December 2016, followed by efforts to limit the deficit led to a decline to 82% at the end of 2018.
But such an approach to financing government debt in response to the crisis is not provided robust recovery and did not help to solve the problem of private debt. Conversely, lending to the private non-financial sector, which fell from 151% of GDP of the responding countries in March 2008 to 139% in December 2011, since then has grown and reached 151% of GDP at the end of 2018, well above the pre-crisis rate.
This return of high levels of debt due to the fact that lending to the household sector (including non-profit institutions serving households), which, although it is characterized by high volatility, decreased from 67% of GDP in March 2008 to 60% in December 2018. But more importantly, corporate debt (loans or non-financial corporations), which in a short period fell from a level of 84% of GDP in March 2008, up to 97% of GDP in March 2018 and amounted to 92% in December 2018.
In developed countries, the debt problem because of corporate loans is particularly acute. In the advanced economies, lending to non-financial sector, which rose from 206% of GDP in the first quarter of 2003 to 251% during the financial crisis in early 2008, it continued to grow after the crisis.
Initially, this increase was mainly the result of increased government borrowing, which rose from 71% of GDP in the first quarter of 2008 to a high of 114% of GDP in June 2016. On the other hand, credit to the private sector in developed economies declined from 176% when the crisis broke out in March 2008, to about 163% of GDP in 2018.
However, the decline was mainly due to the reduction of leverage in the household sector, which accounted for 80% reduction. Loans to corporations, which peaked at 93% in the first quarter of 2008 remained at the same level in the first quarter of 2018.
In emerging markets, the situation may be even more alarming because of the significant increase in private sector debt. The ratio of lending to non-financial sector to GDP increased from 111% in December 2001 to 120% in March 2008.
But under the influence of borrowing, the ratio sharply increased to 194% in the first quarter of 2018 and amounted to 183% in the last quarter of the same year.
On the other hand, the national debt has grown much less - from 36% in 2008 to 48% a decade later. Thus, the increase in debt of emerging market countries was mainly due to borrowing by the private non-financial sector, where corporate debt rose from 60% of GDP in the first quarter of 2008 to 104% in the first quarter of 2018.
This points to a number of unpleasant developments. First, lending to non-financial corporate sector in the North remained high. The ratio of the credit to GDP ratio in developed countries has increased from 77% in the first quarter of 2001 to 93% in the first quarter of 2008 (before the crisis). After the crisis, this figure averaged 91% during the 2017-2018 period. Any increase in interest rates will increase the pressure on corporations due to their huge pile of debt, and it will increase the risk of default.
In emerging markets increased both public and private debt: the first - with 36% of GDP in March 2008 to 48% in 2018, and private debt - from 83% to 138%. In these countries also significantly increased corporate debt, mainly due to foreign currency loans.
The external debt of poor countries has also increased. The volume of foreign debt of developing countries with low incomes, which declined from $ 87.8 billion in 2000 to $ 83 billion in 2008, since then more than doubled to $ 173 billion.
Overall, a specific approach to the global financial crisis, the problem has led to the emergence of the debt spiral, do not give a special performance of the world economy. There is a real possibility of another collapse of the debt market.
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