Saturday, April 13, 2013

Global top 10 debt analysis

The top 10 indebted nations of the world are the countries who are currently struggling from the financial downturn. While US tops The list in terms of absolute value, japan stands out in terms of debt to gdp ratio. Though raising of the debt ceiling by the us has already triggered a fear of double dip recession, there are others as well who are giving the world sleepless nights.

Everybody knows it

The raising of the debt ceiling by the Obama government followed by S&P’s downgrade of US treasury bonds says it all. With the country now sitting on top of a debt pile that is a notch higher than its GDP of $14.7 trillion, the largest in the world, the global economy is now teetering on the brink. But the gradual escalation in debt, which has been happening for over a decade before it just shot up to $10.5 trillion in 2008 after a $700 billion bailout package, doesn’t seem to be taking a breather. IMF forecasts US debt will increase to $15.15 trillion by 2015. Obama’s ratings have apparently fallen to the lowest ever. If one could prove a negative correlation of his ratings with debt, would that motivate him enough to reduce US debt?

Do the world like japan

If the US showcases the highest national debt, Japan is not too far behind with a total debt of 1,055.54 trillion Japanese Yen ($13.75 trillion using exchange rates prevailing on August 17, 2011). Considering the current sensitivity of the global financial market, the impact of the dire fiscal position of Japan could be felt worldwide as it is also capable of creating a domino effect on the sovereign debt front. The country has so far been able to save itself despite a huge debt load since the days of the real estate bubble burst (early 1990s). Also, a major reason why the country is still not considered to be in a financial-crisis mode is that it owes most of that debt to itself. Moreover, IMF forecasts Japan’s debt will grow at a slower rate than the US.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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