Morgan Stanley just came out with a fresh chartbook looking through Asia’s debt situation again. It’s safe to say that it’s still looking grim.
While all eyes are on Europe, falling inflation (and the threat of full-blown deflation) are major hazards in Asia, too. When economies grow more slowly, if they can’t slow their debt accumulation down by the same pace, those liabilities get bigger and bigger in comparison to GDP. Paired with rocketing corporate debt, it looks very ugly.
Morgan Stanley’s analysts looked at 10 countries in Asia ex-Japan (AXJ) – Singapore, China, Hong Kong, Korea, Thailand, India, the Philippines, Indonesia, Taiwan and Malaysia.
But the strange thing is that Asia isn't actually issuing as much debt as it did before. So what's the problem?
It's because inflation is falling away around the world: Asia's developed economies are no exception.
Low inflation and growth mean Asia's emerging markets can't outgrow their debt as they have in the past.
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