Economist: Asia’s debt will weigh on growth

The rising level of debt in Asian countries—especially China, India, Malaysia, and Thailand—will weigh on their growth over the next decade though the region will still remain the global growth engine, according to a recent report by Bloomberg.

Priyanka Kishore, lead Asia economist at Oxford Economics in Singapore Asia was quoted by the report as saying that high domestic savings and resilient supply side dynamics are the mitigating factors.

"These should act as substantial buffers," Kishore was cited as saying. "Even with growth slowing to 3.5% by 2030 (from around 5% currently), we expect Asia to remain the largest contributor to global growth in the long run."

Oxford estimates that the debt of households and non-financial firms will stay above 100% of GDP in most Asian economies, excluding Japan, in the long run, the report says.

While Kishore said that conventional analysis indicates this should weigh on growth, country specific factors such as the distribution of private sector leverage by assets/income level found that China, Malaysia and Thailand, and India to a lesser extent, stand out as vulnerable to debt-induced spending cutbacks, the report adds.