Tuesday, January 5, 2016

5/1/16: Debt Pile: Advanced Economies Lead

After some 8 years of crisis and post-crisis deleveraging, one would have expected a significant progress to be achieved in terms of reducing the overall debt piles carried by the world’s most indebted economies.

Alas, the case cannot be made for such improvements. Here is a chart based on the latest BIS data (through 1Q 2015) plotting the distribution of total real economic debt (Government, private non-financial corporates and households) across the main economies:

As the chart above indicates, there are at least 23 economies with debt/GDP ratio in excess of 200 percent, seven economies with debt to GDP ratio close to or above 300 percent and 3 economies with debt to GDP ratio in excess of 300 percent. But the true champs of the debt world are Japan and Ireland, where based on BIS data, debt to GDP ratio is in excess of 375 percent. 

It is worth noting that Germany is the only advanced economy in the chart that has debt/GDP ratio below 200 percent. Of all original Euro area 12 economies, Germany, Austria and Finland are the only three economies with debt/GDP ratio below 250 percent. Six out of top 10 most indebted economies in the chart are Euro area members.

Do note that the above omits local authorities and state bodies debts, so the true extent of debt pile up around the world is significantly larger than that presented in this figure.

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