Mapping global debt danger zones as alert sounds over credit trigger for a new crisis

Our risk map identifies ten countries where the danger from household debt is flashing red and the threat of this leading to financial crisis and economic upset.

Overall, though, we found that the medium-term risks from a rising household debt burden are less severe globally than the IMF’s suggested. The present low interest rate environment, improved policy regimes with tougher scrutiny of banks by regulator and watchdogs, and lower balance sheet risks relative to a decade ago all mean we are more sanguine on the worldwide implications that the Fund. We concluded that global credit risks are much less systemic than 10 years back – especially in the larger advanced economies.

But important pockets of vulnerability to debt danger also emerged in our analysis – especially in high-yield (riskier) corporate debt and US commercial property.

The countries where we found the greatest specific concern meanwhile were Australia, Canada, Korea, Norway and Switzerland where household debt is rising at exceptionally fast rates from already elevated levels.

We also concluded that there has been a major rotation of global credit risks so that debt has been rising faster than the trend level of economic growth in emerging markets over recent years whereas in 2007 rapid credit growth was prevalent in the major developed world economies.

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