Independent Strategy

Emerging Markets – still stretched

While the rest of us had a credit bust, emerging markets had a binge. Private sector credit is rattling along at 15% growth, if down from more than 20% a year ago. It has increased as a percentage of GDP by around 20% points since the financial crisis began, with Asia being the worst offender. This is way above the expansion rate that signals future credit problems. At best, the excesses and imbalances will weigh on EM growth. At worst, it will cause asset price deflation and economic collapse.

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