Global Debt Review 2020
Paul Jackson. Global Head of Asset Allocation Research, and András Vig. Multi Asset Strategist
Debt remains largely a developed world phenomenon, with the private sectors of countries such as Belgium, France, the Netherlands and Switzerland carrying a lot of debt (as well as China). Public sector debt problems are well known in countries such as Japan and Italy but government debt has been on the rise in many countries in recent years, especially the US.
Luckily, interest rates and bond yields are at multi-century lows in many countries, which helps to depress debt service ratios. Despite this, some countries are experiencing an upward trend in the private sector debt service burden, notably Canada, China, France and Switzerland.
We suspect that elevated debt will not be a problem as long as debt service ratios remain under control. Economic recession and/or a sharp rise in financing costs could raise debt ratios and debt service costs. We are about to discover if recession alone is enough to make debt a problem. Let's hope central banks can keep a lid on financing costs.
