The Organization for Economic Cooperation and Development (OECD) warned that the growing burden of private debt in both developed and developing countries poses a risk to economic growth. At the same time, Canada, South Korea and the UK are the world’s leading lenders to households.
“Household debt and corporate debt in many developed and developing economies is high”, said the OECD in a previously published part of a report to be presented next week. “While higher indebtedness does not necessarily mean that the problems are approaching, it strengthens vulnerability to shocks”, said the paper.
The global economy has been the most evenly expanded since the financial crisis. Debt levels and loan quality are, however, among the risks that may cause a drop. Consumer liabilities reach 100% of Canada’s gross domestic product, and in South Korea and Bahrain they are over 80%.
With regard to corporate debt, the OECD warns of a shift in banks’ risk to the bond market and a “significant” decline in credit quality.