Rising Debt levels May Stifle Growth in Stable Nations

Rising debt levels in Asia's "seemingly healthy" countries could drag the region's growth below current forecast levels, according to World Bank Chief Economist Indermit Gill in an interview with Reuters on Oct 9.

Gill said he was still concerned about the slow pace of debt restructurings under the Group of 20 Common Framework for Restructuring the Debts of the Poorest Countries, and that those processes needed to be accelerated.

However, he expressed concern about Asia's surprisingly high debt levels, noting that increased government borrowing from domestic markets would limit the amount of credit available to private firms, resulting in faltering investment.

"We have a simultaneous problems: too much debt and too little investment," he told the crowd. "A lot of government consumption and private consumption is financed by debt." There isn't a lot of credit-financed investment, which is unfortunate."

The result could be "much lower growth" than expected, he said, without providing specific figures. "As a result, there will be no debt distress; only slowing growth." However, it is a serious issue. Now we're talking about enormous countries."

Gill declined to provide specific examples, but according to a recent World Bank report, government debt in the average South Asian country is around 85% of GDP, which is higher than in any other emerging market or developing economy.