Debt could hinder global economy

- Associated Press, FRANKFURT

Jun 26, 2017-

The global economy has picked up and prospects for the next few months are the best in a long time.

But the recovery is maturing and faces risks from populist rejection of free trade and from high debt that could burden consumers and companies as interest rates rise.

Those were key takeaways from a review of the global economy released on Sunday by the Bank for International Settlements, an international organisation for central banks based in Basel, Switzerland.

The report said that “the global economy’s performance has improved considerably and that its near-term prospects appear the best in a long time.” Global growth should reach 3.5 percent this year, according to a summary of forecasts, not quite what it was before the Great Recession but in line with long-term averages. On top of that, forecasts by governments and international organisations as well as by private analysts point to “further gradual improvement” in coming months.

Key risks include a possible weakening of consumer spending across different economies. So far, the recovery has been largely fueled by people being willing and able to spend more.  

But that trend could fall victim to higher levels of debt as interest rates rise in some countries and as the amount people need to spend to service their debts takes a bigger chunk of income. Countries that were slammed by collapsing real estate markets during the Great Recession seem less vulnerable now, such as the United States, the U.K., and Spain. But debt burdens are more worrisome in a range of other countries mentioned in the report, including China, Australia and Norway.

The BIS urged governments around the world to take advantage of the economic recovery as an opportunity 

to make growth more resistant to trouble by implementing pro-business and 

pro-growth measures.

Published: 26-06-2017 09:05

User's Feedback

Click here for your comments

Comment via Facebook

Don't have facebook account? Use this form to comment