BREAKINGVIEWS-QE gave emerging markets brief gains, lasting pain
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.) (Refiles to add calculator.)
By Andy Mukherjee
SINGAPORE Oct 30 (Reuters Breakingviews) - Six years of quantitative easing in the United States have brought fleeting gains to emerging markets, and more enduring pain.
The Federal Reserve's near-$4 trillion bond-buying splurge raised the growth rate in many developing economies only briefly, while fuelling a credit binge. Now that QE has ended in the United States, emerging markets find themselves in an unenviable situation: they are saddled with high debt, and struggling to boost output to repay the loans.
Of 23 emerging markets analysed by Breakingviews, as many as 17 now have much higher private debt-to-GDP ratios than the average before the Fed embarked on its policy.
Calculator: Impact of QE on emerging markets: reut.rs/1wHrEAz
The build-up has been particularly striking in small, open Asian economies. Total credit in Hong Kong has zoomed to 250 percent of GDP, while in Singapore it has reached almost 140 percent of GDP. In nine developing economies, government borrowing has risen sharply. The Czech Republic's public debt is 40 percent of GDP, double the pre-QE average. Malaysia's government debt has expanded by 10 percent of GDP. Продолжение...