Hyundai Research Institute "Global Economic Crisis Possible This Year Due to Debt Landslide"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] An analysis has emerged that the global economy could face a major crisis this year due to a 'Debt Landslide.'

On the 12th, the Hyundai Research Institute identified 'Debt Landslide' as one of the top 10 global trends for 2020 in its report 'Top 10 Global Trends of 2020.'

The institute stated, "The global economy, unable to bear the weight of the ever-mounting global debt like a mountain, is approaching a point where it could experience a major crisis akin to a landslide."

It particularly focused on corporate debt issues. As the economic slowdown continues, if corporate insolvencies deepen, the number of insolvent companies will increase, which could in turn lead to the insolvency of financial institutions that have lent funds to these companies. The institute forecasted, "This phenomenon has a high possibility of leading to a global financial crisis or a foreign exchange crisis."

According to the report, the ratio of global corporate debt to Gross Domestic Product (GDP) already reached 88.0% in the first quarter of 2014 and rose to 93.7% in the first quarter of last year. This increase in debt is the result of major countries continuously lowering benchmark interest rates.

Major institutions such as the Bank for International Settlements (BIS) report that when the corporate debt-to-GDP ratio exceeds 80-90%, excessive debt itself can constrain growth.

The institute also identified 'Tensions in the Strait of Hormuz' as one of the expected global trends this year. Although tensions between the U.S. and Iran are currently in a lull, geopolitical conflicts could prolong due to U.S. economic sanctions and rising anti-American sentiment within Iran. With ongoing tensions over the Strait of Hormuz, the institute pointed out that international oil prices could surge or experience increased volatility.

Other new trends highlighted include ▲China's deflation concerns ▲weakening of the U.S. dollar ▲restructuring of global value chains due to protectionism ▲autonomous vehicles. Globally, social interest in inequality is also expected to grow.

This content was produced with the assistance of AI translation services.