Moody's: Rising emerging market debt increases risks; Asia leads debt growth globally

In its latest outlook on the emerging market economies, the US rating agency, Moody’s Investors Service, noted that risk remains to the downside in wake of rising debt in Asia and other emerging market economies.

Key Quotes:

“Emerging market economies are becoming increasingly vulnerable to external shocks after a decade-long build-up of debt”

“The growth in debt was the highest in the Asia Pacific region, with the largest increase in external borrowing in China, India, Indonesia, Taiwan and Malaysia”

“While China's external debt to GDP ratio is still the second-lowest globally at 13% of GDP in 2015, the average external debt to GDP ratio for Asia as a whole has recently increased from 31% in 2008 to 47% in 2015 -- well below the 78% of Emerging Europe, but comparable to the 48% in Latin America and the 43% in the Middles East and Africa region” 

“Expect that global economic growth will remain sluggish for the medium term and commodity prices will stay low for several years going forward”

“This will affect foreign exchange revenues and reserve accumulation for commodity exporters”

"The potential for capital flows to slow, should US interest rates continue to rise, would also exacerbate the debt situation in emerging economies"