World Set For Emerging Market Mass Default – – Even The IMF Sees It

admin Alternative Media, Banking, Fiscal Policies

The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates.
The IMF said corporate debts in emerging markets ballooned to $18 trillion (12 trillion) last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt.
It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises.
‘As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,’ the IMF said in a pre-released chapter of its latest Financial Stability Report.
It warned that this could create a credit crunch as risks ‘spill over to the financial sector and generate a vicious cycle as banks curtail lending’.

This post was published at David Stockmans Contra Corner on September 30, 2015.

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