Among the many uncertainties that have spooked stock markets in early 2016 – from power rivalries in the Middle East to Europe's unabated refugee crisis – the most unsettling has been the slowdown in emerging markets, as signaled by a collapsing oil price.
Until 2015, emerging markets were the engines of global growth. Now Brazil and Russia are in recession, while China and other Asian economies are losing momentum. Among a myriad of factors that are weighing emerging markets down, the growing burden of private debt has received most attention recently. And rightly so.
Debt of households and non-financial companies in emerging markets has increased strongly since 2007, from around 80 percent to 120 percent of GDP.
Concurrently, at least since 2010, much of the industrialized world has been deleveraging.
This is why some observers are talking about private-sector debt in emerging markets being the third stage of the global debt crisis – from mortgages in the US to sovereign debt in the eurozone and now to private-sector debt in emerging countries.