Rising debt in Asia puts the region at risk, says IMF expert

Aggregate debt in Asia has risen sharply, according to an IMF expert who mentioned Laos, among others in Asia, as a country that could be at risk. The country is home to many Buddhist monuments, including the “Great Stupa,” seen here in a stock photo, the most important Buddhist monument located in Vientiane, the capital of Laos.

Phoonsab Thevongsa | Moment | Getty Images

According to Krishna Srinivasan of the International Monetary Fund, rising debt levels driven by inflation and tightening financial conditions across Asia are cause for concern.

“If you look at the region’s debt, if you look at Asia’s share of total debt, aggregate debt, that’s gone up quite a bit,” Srinivasan, director of the IMF’s Asia and Pacific Department, told “Squawk Box Asia” by CNBC. ” Wednesday.

He said debt in the region has risen from 25% before the pandemic to 38% now.

Srinivasan said countries at risk include Laos, Mongolia, the Maldives and Papua New Guinea, noting that Sri Lanka has already defaulted on its debt.

Inflation in Laos hit 23.6% in June. The Asian Development Bank likes Mongolia’s Annual inflation will reach 12.4% in 2022. The Maldives has been struggling with high debt for years. Although the Maldives’ debt-to-GDP ratio has fallen over the past two years, it is still roughly high. 100% of GDP.

“So there are many countries in the region that are facing high levels of indebtedness. And some of these countries are in debt distress territory. And that’s something we have to watch,” he said. said Srinivasan.

In its world economic outlook released on Tuesday, the IMF forecast a sharp slowdown in global growth from 6.1% last year to 3.2% this year, forecasting that growth in both China and India will be affected.

As a result, Srinivasan said growth in Asia will be significantly affected in 2022 and 2023, slowing to 4.2 percent and 4.5 percent, respectively.

“This year, we see inflation as a pretty big factor. We actually dialed down our inflation forecast for Asia more broadly and it’s particularly true for advanced economies in Asia,” Srinivasan said. He has not, however, ventured to guess “whether we are going to see a crisis or not” in the region.

“The [growth] the reductions reflect the serious impact of the [Ukraine] war The war has led to [a] significant rise in inflation,” Srinivasan said.

He said Asia as a whole has seen a considerable tightening of financial conditions, particularly as advanced economies raise interest rates.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!