Page 27 - WEF Reoprt 2020

FIG U RE 2 .4 14 consecutive months, dropping below the
OECD Business Confidence Index no-change threshold for the first time since
2016 and reaching a 10-year low in October
Index score of last year (see Figure 2.4). 9
102
High debt
101 Private and public debt has been accumulating
since the crisis. According to the IMF, the
100
global ratio of debt-to-GDP increased by
99 11 percentage points between 2009 and
2017. Across G20 economies, public debt is
98 expected to reach 90% of GDP in 2019—the
highest level on record—and to grow even
97
more, to 95% in 2024 (see Figure 2.5). 10
96
Oct Private debt has built up on the basis of
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
lower interest rates—particularly in China and
the United States, where more than 40% of
Source: OECD Data, Business confidence index, https://data.oecd.org/leadind/ total private debt is located. In the second
11
business-confidence-index-bci.htm, accessed 3 January 2020.
quarter of 2019, non-financial corporate
12
Note: Numbers above 100 suggest an increased confidence in near future debt reached 156% of GDP in China. In the
business performance, and numbers below 100 indicate pessimism towards United States, non-financial corporate debt
future performance.
reached 47% of GDP in the third quarter—
the highest level ever recorded—according
to Federal Reserve Bank of St. Louis data.
13
The IMF has listed “rising corporate debt
95 % burdens” as a key vulnerability in the global
financial system.
14

of GDP: expected Narrow margins for stimuli
As economic warning signs begin to
G20 debt in 2024 flash, there is a risk that the tools
previously used to brake economic slides
may no longer be available. Financial
market stress and strained public finances
are creating uncertainty as to whether
conventional monetary and fiscal policy
FIG U RE 2 .5 instruments, which have worked to boost
G20 General Government Gross Debt growth in the past, could be as effective
in the future.
% of GDP
Monetary constraints
100%
As the IMF has signalled, interest rate cuts
95%
have helped boost growth, but they have also
90% fostered higher debt and riskier rent-seeking,
85% which affect financial market stability. In
15
80% 2019, monetary policies worldwide saw
profound reversals, with most central banks
75%
persistently cutting interest rates to very—
70%
sometimes historically—low levels. In the
16
65% United States, after nine consecutive hikes
2001 2019 2024 between 2015 and 2018, the Federal Reserve
lowered its target interest rate from 2.50%
Source: World Economic Forum estimates with data from IMF DataMapper, https:// in December 2018 to 1.75% currently. The
17
www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/
WEOWORLD, accessed 15 December 2019. European Central Bank (ECB) cut its deposit

22 The Fraying Fundamentals