Economists are worried that the recent US tax reform and the high level of China’s debt could shake up the global economy. According to McKinsey Global Institute, global debt has increased by the equivalent of SEK 500,000 billion, around 20% of GDP, since the 2008 financial crisis.
Swedish central bank Governor Stefan Ingves has expressed concern, saying: “Every time debt rises, the phenomenon is the same, regardless of whether it is in the public or private sector. Economies must outpace debt so that they do not explode”.
The global economy grew at its fastest pace for six years in 2017 and the trend is expected to continue in 2018, which many consider a positive sign. However, Harvard economist Carmen Reinhart said in a debate piece the other year that it is no coincidence that the world’s three most indebted economies – Greece, Italy and Japan – have seen the worst performance of the developed economies in the past 20 years. Stefan Ingves believes there is little to suggest China will be different: “All attempts to defy the law of gravity usually fail sooner or later,” he has told DI.
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