Thailand is also characterized by high levels of private debt, which has increased by 12% when compared to last year. Household debt in Thailand now makes up 80% of GDP, which is one of the highest ratios in Asia and this is a marked increase from the 55% figure that was seen in early 2009.
Some of the biggest concerns will be realized if Federal Reserve tapering continues to limit U.S. demand for emerging markets exports. Policy change speculation has caused long-term interest rates to move higher, with yields on the 10-year Treasury note hitting a two-year high near 2.9%. This ultimately attracts investment capital back into U.S. assets, and exacerbates current account problems seen in emerging markets.
After the 2008 financial crisis, lower interest rates meant it was easier for Asian economies to attract investment and boost prospects for growth. But with the economic imbalances created by growing debt levels, investors need better potential for returns in order to justify the added risk.
But when we look at the performance seen in Asia's individual economies, internal factors look even more discouraging. Whether or not emerging Asia's financial stability will continue to erode will depend largely on the region's ability to calm investor fears and attract foreign investment.