Household spending, you will have noticed, has been a key driver of growthacross Asia in recent years. Trouble is, in many economies this was fuelled bya solid rise in consumer debt. In itself, of course, this need not signalimpending financial stress. For example, unlike in the United States during thelast decade, there are few signs that the region has a “sub-prime” problem, withmost of the borrowing taken out by relatively more affluent households.

　　Moreover, regulators generally apply stricter rules in Asia, such as conservativeloan-to-value ratios for home mortgages. Still, this doesn’t mean we can ignorethe issue altogether. If a good chunk of consumer spending was driven byleverage in recent years, a slowdown in credit will inevitably hurt demand. Arapid build-up in household debt, therefore, can quickly become a growthproblem for overly leveraged economies. Over the last few years, householdcredit has increased especially sharply in Australia, Malaysia, Thailand, Korea,Hong Kong, and China. In Singapore, too, leverage has climbed briskly since2008, but this has started to reverse last year. By contrast, consumer debt is stilllow in Indonesia, India, the Philippines, and Sri Lanka, even if we take intoaccount their lower per capita income. It is here, therefore, where there’s stillsome fuel left.