ZURICH An extra $103 trillion of credit is needed over the next decade if global economic growth is to meet consensus forecasts, the World Economic Forum and McKinsey said in a report to be discussed at next week's Davos meeting.
The study, to be presented at the WEF's annual meeting of policymakers, bankers and business leaders in the Swiss ski resort, said meeting credit demand would be challenging.
"Globally, financial protectionism may constrain cross-border financing, a key to the provision of sufficient credit in the next decade, as global imbalances persist," the WEF said in a statement on Tuesday.
It said Asia might struggle to meet high credit demand growth of $40 trillion with less developed financial systems and capital markets, while banks in the European Union would need to lend a further $13 trillion.
"To supply this, banks will require additional capital that, after retained earnings, could lead to a capital shortfall of $2 trillion," the report said.
Meanwhile, the United States will continue to need to draw on global savings, potentially by up to $3.8 trillion in 2020, to fund its credit needs, unless there is a big increase in the domestic savings rate.
"The report finds that the large projection in credit demand can be safely met, but financial institutions, regulators and policymakers need more robust indicators of unsustainable lending, contagion risk and credit shortages," it said.
(Reporting by Emma Thomasson, editing by Mike Peacock)