Low Interest rate do not provide permanent protection against financial crisis

World Bank has sent out a warning for the risks of a fresh debt crisis around the world and it has urged the central banks and governments to make note of the fact that the interest rates being historically low might not in fact be good enough for offsetting one more financial downturn.

In the GEP report which is published biannually, the World Bank said that there were four waves in the last five decades of debt accumulation.

This current wave that had begun in the year 2010 has been said to be the largest and the fastest when it comes to global borrowing after the 1970s.

World Bank said that the low levels of the interest rates which the markets expect are going to sustain in the medium term, do mitigate a few of the risks which are associated with the higher debt levels, the last three waves of the debt accumulation which is broad based have all ended  with there being a financial crisis in the emerging and developing economies.

The experts say that the rates of interest do not provide permanent protection against the crisis.

In the year 2018, the debt of the world had gone on to reach a record level of high of close to 230% of the GDP as per the World Bank. The total amount of debt from the economies which are emerging or the ones which are developing has in total reached a high of almost 170% of the Gross Domestic Product. This is a major increase of 54 points of the GDP after the year 2010.

China has been the country which has accounted for most of this debt

Add a Comment

Your email address will not be published. Required fields are marked *