Turkey one of least indebted countries: McKinsey report

ISTANBUL

Turkey has become one of the 10 countries with the lowest debt-to-GDP ratio among 47 countries surveyed, according to the latest report by consultancy firm McKinsey.

In the 47-country list Turkey ranked 38th, with a debt-to-GDP ratio of 104 percent in 2014. Its total debt increased by around 28 percent between 2007 and 2014, including a rise in companies’ debt of 22 percent. Public debt, however, decreased by 4 percent in the same period, according to the report titled “Debt and (Not Much) Deleveraging.”

Despite the growing availability of foreign credit for developing economies, the majority of their debt is still financed by domestic banks and investors, with the exclusion of four countries, including Turkey.

“In our sample of developing economies, foreign investors hold 22 percent of total outstanding bonds, on average. However, in four countries in our sample, Hungary, Indonesia, Peru, and Turkey, foreign investors own more than 40 percent of bonds outstanding. This might create more risk if foreign investors withdraw their funds in reaction to external events, such as rising interest rates in the United States. Restructuring debt of external creditors may also be more difficult,” the report stated.

The most indebted country was Japan with around 400 percent of debt-to-GDP, followed by Ireland, Singapore and Portugal.

Since 2007, global debt has grown by $57 trillion, raising the ratio of debt-to-GDP by 17 percentage points, the report also stated.

Fueled by real estate and shadow banking, China’s total debt has quadrupled, rising from $7 trillion in 2007 to $28 trillion by mid-2014, the biggest rise. At 282 percent of GDP, China’s debt as a share of GDP, while manageable, is larger than that of the United States or Germany, the report added.