2020 may be the year when the ‘largest, broadest and fastest’ wave of debt crashes over the global economy. You have been warned

The World Bank has provided a chilling analysis of the latest tidal wave of borrowing, which had reached US$55 trillion by 2018. Even though interest rates are low now, they provide no sure-fire protection against debt crises

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A bank employee counts out 100-yuan notes in Shanghai. China and the US pushed global debt to a record US$251 trillion in the first half of 2019. Photo: AFP

Published: 1:00am, 30 Dec 2019Updated: 1:00am, 30 Dec 2019

Which will be the biggest international crisis of 2020: a North Korean missile crisis, the re-election of Donald Trump, a post-Brexit slump, a stock market crash or a climate crunch? Any or all of these are possible but a global debt crisis could eclipse them all.

I make no apologies for returning to the subject of global debt, even if it does make for rather dismal new year reading. The World Bank (under the leadership of former US Treasury undersecretary David Malpass) has just weighed in with a whole book on why another debt crisis could be imminent.

The World Bank is by no means the first to sound the alarm (others include the International Monetary Fund, the Institute of International Finance and the Bank for International Settlements), but its historical analysis of how and why such crises occur is as thorough as it is chilling.

The book, Global Waves of Debt , identifies four such waves since 1970 which have wreaked greater or less havoc in the global economy and warns the latest wave “has already seen the largest, fastest and most broad-based increase in debt in emerging market and developing economies … in the past half-century”.

China is the biggest emerging economy and the World Bank suggests that the “debt-fuelled” investment boom there could result in non-performing loans and a corporate debt crisis. Given the size of China’s economy, spillovers to other emerging economies could be “significant”.

Total public and private debt in emerging and developing economies has increased dramatically over the past 50 years – from 47 per cent of GDP to around 170 per cent, according to the World Bank. Government debt has doubled to 50 per cent while private debt has risen sixfold to 120 per cent.