Western nations can learn from developing countries' debt recovery
Advanced economies attempting to recover from the global financial crisis (GFC) could learn a lot from the way emerging economies navigated past financial crises, according to PIMCO chief executive Mohamed El-Erian.
Systemic crises such as the GFC tend to shock public finances in a consequential and protracted fashion, he said.
“Advanced economies currently face the challenge of dealing with a large and rapid increase in both budget deficits and the stock of public debt. As a result, sovereign risk issues are important drivers of market valuations and correlations, and will remain so in the period ahead,” El-Erian said.
Cyclical approaches would not be sufficient to solve deep structural issues such as a downturn in the real estate, finance and construction markets, he said. Western governments needed to act quickly to resolve these issues to secure long-term global growth, employment creation and financial stability, he said.
Australian investors also need to be aware that global policy measures affect the currency outlook, the relative risk-return characteristics of developed versus emerging market exposures and the approach to risk mitigation, El-Erian added.
The fluidity of the current environment and ongoing global paradigm shifts favoured an active approach to fixed income portfolio management, he said, warning investors against sitting in a passively managed global bond fund.
AUTHOR
Mike Taylor
Recommended for you
The strategic partnership with Oaktree Capital and AZ NGA is likely to pave the way for overseas players looking to enter the Australian financial advice market, according to experts.
ASIC has cancelled a Sydney AFSL for failing to pay a $64,000 AFCA determination related to inappropriate advice, which then had to be paid by the CSLR.
Increasing revenue per client is a strategic priority for over half of financial advice businesses, a new report has found, with documented processes being a key way to achieving this.
The education provider has encouraged all financial advisers to avoid a “last-minute scramble” in meeting education requirements prior to the 31 December 2025 deadline.
