With the European debt crisis dragging on for its third year and sequestration never far from the front pages clearly demonstrating the fiscal management or lack of from America, it’s worth noting the financial health of the rest of the world is actually not that bad.
Far gone are the days when the developing world would be in the headlines for defaulting on payments and having countless debt crises. With Europe and the U.S going down painstaking paths at the moment, the developing world countries have been allowed to follow policies that have padded their citizens from the impact of the global slowdown.
In the Euro zone, gross external debt is worth about 125% of GDP, compare that to the developing world where the average external debt to GDP is 42% and less than one in three countries have a ratio that is over 50%.
With these lower initial debt levels, developing countries were able to weather the 2008 crises better and bounced back faster than advanced countries. And most recently due to the lower debt, higher reserve, credible bank leadership and stronger reserves – many developing countries have been able to increase spending and reduce interest rates to avoid shrinking their economies.
Hopefully this will continue, however they cannot be complacent and what’s going on in the Eurozone and U.S should be enough for the decision makers in these countries to take notice and not be complacent.
I hope that you have enjoyed reading this post.
Kuala Lumpur : Malaysia