There’s little to like here for investors. The iShares MSCI Italy Index (ETF) (NYSEARCA:EWI) ETF dove earlier this year with the nation’s tumultuous election. While it has recovered since and has posted 30% gains over the past 52 weeks, the iShares MSCI Italy Index (ETF) (NYSEARCA:EWI) has lost 1.3% this year. Italy’s economic woes and this ETF’s performance aren’t one and the same, however. If the European Central Bank continues to lower interest rates as it has in the past, this iShares MSCI Italy Index (ETF) (NYSEARCA:EWI) could rise even as the nation’s recession lingers on. However, Italy’s a risky proposition at best, and with other, more stable markets surging, there’s no reason to take a flier on this pick.
In short, don’t expect Italy’s debt to come down much in coming years — nor should you expect its economy to please any economists. The IMF predicts Italian debt to fall less than 7 percentage points over the next five years.
No. 2: Greece, 179% Debt/GDP
Ah, Greece. We were all wondering when Europe’s most notorious debt-plagued economy would show up. The Mediterranean nation ranks first in debt among the recession-wallowing continent. The eurozone recently “commended” Greece’s fiscal performance in 2012, but don’t let that fool you: The Greek economy contracted 5.3% in the first quarter. Harsh austerity measures should help drag down this debt, as the IMF forecasts Greek debt to sink to 144% of GDP by 2018, but those same measures have driven up unemployment to an eye-popping 27%.
Select Greek stocks have done well in the past year, but this is undoubtedly a risky region for investors. Even global Greek stocks such as Navios Maritime Holdings Inc. (NYSE:NM), which has gained 35% this year and offers an enticing 5.1% dividend at a low payout ratio, face plenty of challenges. Navios Maritime Holdings Inc. (NYSE:NM) is still plagued by the Baltic Dry Index’s nosedive, as well as a substantial 105% debt-to-equity ratio. Until shipping rebounds, Navios Maritime Holdings Inc. (NYSE:NM) and its fellow Greek shippers won’t be tossing lifesavers to anyone’s portfolio.
No. 1: Japan, 245% Debt/GDP
The world’s most debt-burdened nation is also home to 2013’s best stock market. Here’s a debt crisis that investors can get behind.
Japan’s debt isn’t so much the product of recession — as with the European nations above — as it is a consequence of the country’s two decades of stagnation combined with new Prime Minister Shinzo Abe’s ultra-aggressive stimulus tactics. Abe’s hope is that easy money will ignite the Japanese economy after years of sluggish growth, which would help ease this inordinately high debt. If the plan fails, however, Japan will be stuck with a monster debt just in time for an aging population to tax social systems to the brink. That’s a bad combination for this economy’s future.
In the meantime, however, investors have plenty to gain across the Pacific. Abe’s stimulus is great news for the country’s financial sector, and brokerage firms such as Nomura Holdings, Inc. (ADR) (NYSE:NMR) have capitalized on Japanese stocks’ wild gains. With the yen weakening against the dollar, investors continue to pour money into Japanese stocks — a cycle that will continue to fuel Nomura Holdings, Inc. (ADR) (NYSE:NMR)’s success and reward the firm’s shareholders. The company recorded its best quarterly profit in seven years last quarter, and while Nomura Holdings, Inc. (ADR) (NYSE:NMR)’s stock certainly isn’t cheap right now, it has a bright future so long as this rally continues.
America’s debt misses the list
While the U.S. public debt didn’t make the top five, don’t think America is in a better spot. The IMF estimates American debt to be 108% of GDP and expects that number to fall to just 106% by 2018. The U.S.’s slow but steady rise out of the recession should help lessen the debt’s impact, but if the country doesn’t get a grip on its debt soon, America could well rise up the ranks of the debtors.
The article The World’s 5 Most Debt-Ridden Countries originally appeared on Fool.com is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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