Warning that the debt crisis situation in Asia has seen a rise again two decades ago

New delhi date. August 20, 2019, Tuesday

Consultancy firm McKenzie has issued a warning that the debt crisis seen in the Asia area two decades ago is reappearing. Increasing debt, strain on loan payments, weakness of lenders and the deteriorating current of non-banking financial companies have raised concerns for the Asia area, Mackenzie's August report said.

The pressures raised remain to be seen if a new crisis arises, but governments and businesses need to keep an eye on possible causes, the report noted.

The dwindling global economy has put pressure on Asian companies' incomes, and the US-China trade war has prevented investors from investing more in debt instruments. Moody's said last week that most of the Asian governments are expected to ease the effects of the global recession through financial and fiscal policy measures. McKenzie studied the balance sheets of up to 5 companies from 5 countries in Asia-Pacific and found that most companies were having trouble repaying their loans.

In countries like China and India, such pressures have risen by five and since then the pressures in the US and UK have been decreasing, Mackenzie said. The long-term debt amounts of companies with interest coverage ratios below 1.5 times were also reviewed. Up to this level companies use a significant portion of their income to repay debt.

In the 5th, India, China and Indonesia had long-term debt of more than 5% through companies with a ratio less than 1.8 times.

Two decades ago, several countries, including Korea, Thailand, Indonesia, were flooded with debt crisis in Asia. To prevent this recurrence of the situation, the governments of Asian countries have implemented security measures from time to time so that the crisis is not repeated.

However, McKenzie also suggested that factors such as defaults on debt repayments, liquidity disparities, and fluctuations in exchange rates could lead to emergencies.