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How do recession and property refinancing affect you?
By Paul Ho / iCompareLoan | May 30, 2016 9:00 AM MYT
Tags: recessionrefinancing

The world is entering a phase of slower growth — this is perhaps one of the more dangerous periods of its history. Since the financial crisis of 2008, the world has become more leveraged instead of less.

Between 2007 and 2014, global debt increased by US$57 trillion. Total debt has grown from 269% of GDP as at 4Q2007 to 286% of GDP as at 2Q2014.

Government debt has grown at a compound annual rate of 9.3%, way faster than GDP growth. And following closely behind is corporate debt.

The world’s total GDP is about US$70 trillion ($97 trillion). But most major governments are running budget deficits of between 2% and 5% of GDP. This means they are running a budget deficit of US$1.4 trillion to US$4.2 trillion. To put the numbers into perspective, US$4.2 trillion is about the annual production of the whole of Japan.

Since borrowings are not directly used to stimulate spending and do not correspond to a proportional increase in GDP, rising debt is incurred when governments service debt-interest payment.

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