Monday 09, July 2018 by Bloomberg

World Bank CEO adds to voices of worry over global debt pileup

 

World debt, including household debt, ballooned to $237 trillion in Q4 2017, that is more than $70 trillion higher than a decade ago.

  

Global debt is becoming a bigger worry as the global policy tightening cycle takes hold, a top boss at the World Bank warned Monday.

“After a decade of low interest rates, the corporate and public debt in many places has ballooned to a staggering $164 trillion,” Kristalina Georgieva, CEO of the World Bank, said in an interview in Singapore on Monday with Bloomberg Television’s David Ingles and Haidi Lun. “With interest rates going up, that attention on debt sustainability has to be stronger.”

Central banks across the world are under pressure to follow a Federal Reserve that is raising interest rates faster than initially anticipated, putting particular stress on emerging markets and developing economies. The need for structural policy changes, including responses to waves of anti-globalisation, remains great as policy makers in most economies have not taken sufficient action during the extended period of low borrowing costs, Georgieva said.

“We do not see many countries taking advantage of this period of strong economic growth to carry forward structural reforms,” she said. “And our advice to countries is, do not wait. Good times may not last -- they usually do not last forever.”

Georgieva said countries must take a hard look at the affordability of projects that they’re undertaking, including in infrastructure, amid still fairly low interest rates. She warned of the “white elephant” problem and said the World Bank is working harder to attract private-sector investors for “blended finance” projects.

The World Bank CEO also made the following comments in the interview:

“So far what we see is that the impact of this worry about protectionism on the world economy is relatively modest” even though the World Bank is concerned about the impact on investor confidence “Our recommendation is focus on where anxiety comes from and solve the problems that are causing this anxiety to turn into a political momentum against trade” US-China trade conflict is “something that has created some uncertainty” but “so far with a strong world economy, it is early to predict where this will take us” With 55 per cent of the world’s population living in cities, more attention must be paid to jobs and social protection for the urban poor; population is rising faster than “the ability of cities to absorb these people” in terms of infrastructure and employment China’s progress on domestic investment has been encouraging, and “great care” must be undertaken to ensure that investment abroad doesn’t aggravate debt

 

  

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