With the world turned upside-down and inside-out by international conflict—Russia’s war in Ukraine, Azerbaijan’s attacks on Armenia, the brewing civil war in Sudan—determining the safest countries is now more important than ever. Global Finance’s safest countries in the world rankings features updated data, a new time frame, and incorporates each country’s experience and risk from Covid-19.

So which countries have proven to be safe and which have not?

Like our previous rankings, the safety score for countries takes into account three fundamental factors. These factors are war and peace as measured by the global peace index, personal security meaning a very low crime rate, and the risk of natural disasters which includes the potential of a new pandemic. In order to make sure the data is relevant to current conditions, the Covid-19 scores were derived from data as of May 30, 2021. Compared to the fundamental factors, our Covid-19 scores weight deaths per capita from the disease twice as heavily as the other factors and takes vaccinations per capita as a countervailing or positive factor into account, weighing it equally as the other fundamentals. In essence, a country’s overall score is made up of one-half fundamental factors, one-third Covid-19 deaths per capita, and one-sixth Covid vaccination per capita.

Deaths per capita is a direct measure of how well or poorly a given country responded to the spread of Covid-19 which in turn is based on the country’s healthcare infrastructure, government capabilities, political leadership and culture in face of a major, unexpected crisis. Vaccinations per capita on the other hand reflects a country’s financial power and future performance via preventative measures stemming further outbreaks.

Since Global Finance’s safest country ranking is driven by data, countries without the relevant metrics were excluded. Countries suffering from political instability like Belarus and Sudan do not have scores from the safety and tourism report while other countries like Kosovo and Somalia are missing data from the World Risk Report.

The top ranking safest countries are spread amongst the European Union and Asia, making them strong contenders for the title of most peaceful region overall. Of the top 20, nine of them are located in Europe and four of those are Northern European (Iceland, Finland, Denmark, Norway). The remaining 11 out of 20 are primarily countries in the Middle East or Southeast/East Asia. Missing from the top 20 are many of the other European countries that performed well in past rankings. Countries such as Portugal, Spain, Slovenia, and Belgium suffered greatly in the rankings because their governments handled the Covid-19 crisis poorly and experienced high Covid-19 deaths per capita as a result. Portugal (29), Spain (41), Slovenia (47), and Belgium (66) all had some of the highest Covid-19 death rates in the world and previously ranked in the top 20 safest countries. Hungary (90), Italy (84), and the UK (38) also saw high Covid-19 deaths per capita which pushed them downward in the ranking. Despite being the world’s only superpower, the United States ranks 71 because although it scored well in other categories it was unable to prevent widespread outbreaks and deaths.

The pandemic created a situation in which many developing countries in Africa and Southeast Asia outperformed their more developed peers. Laos (32), Vietnam (49), and Cambodia (80) as well as African countries such as Uganda (81) and Rwanda (37) all were able to effectively manage Covid-19 and limit deaths per capita which dramatically improved their safety rankings compared to previous years. Yet while these countries effectively managed and prevented Covid-19 outbreaks, they often have much higher risks in terms of military conflict, crime, and general danger to the population.

In essence, Covid-19 disproved the conventional wisdom about the safety of any given country. Countries in North America, Europe, and perhaps some in the Middle East and Asia would dominate the top spots mainly because of their wealth and developed status. Developed countries would also be much better equipped to handle something as dangerous and complex as a pandemic than their less developed peers. Yet what we have seen is that many of the world’s major economic powers (United States, France, U.K) or regional powerhouses (Brazil, Russia, India, China) became epicenters of the pandemic in their areas of the world.

While Covid-19 reshuffled our world’s safest countries ranking, it did not boost the worst-performing countries and their relative rankings. Countries with serious civil conflict that have high risk from natural disasters such as the Philippines, Nigeria, and El Salvador all reported relatively low death tolls from Covid-19, yet performed poorly in terms of safety overall. Yemen’s brutal civil war and El Salvador’s high murder rate (the highest in Latin America) offset any improvement in safety ranking due to avoiding the worst-case Covid-19 scenario.  

The Philippines remained at the bottom of Global Finance’s safest country ranking where it was in the 2019 and 2017 editions because of relatively high crime rates, high natural disaster risk (volcanic eruptions, earthquakes, tsunamis), and poor response to the Covid-19 pandemic. Because we derive our composite safety score from purely quantitative data and indices from global publications, we do not quantify the intensity or lethality risk of factors such as war. So Yemen (where 233,000 people have died as a result of the war) is ranked as relatively more safe than the Philippines because it has less natural disaster risk and violent crimes.

A final word of caution: while the fundamental factors of this ranking rely on concise reports produced by NGOs and international organizations, the Covid-19 death tolls and the vaccination rates are largely based on self-reporting by governments. Countries like China, Tanzania, and Venezuela may not be producing credible figures. Another point of difficulty is that some governments may not be capable of gathering all the necessary data. In developing countries without standardized and modern government reporting structures, deaths can go unreported, making it impossible to measure death tolls accurately. This is probably what is occurring in India as many families have reported undercounting of Covid-19 deaths by the country’s authorities.

To sum up, Covid-19 upended pre-pandemic assumptions regarding which countries are safest and why. While the core factors that ordinarily make up our safety rankings are largely unchanged, Covid-19 presented a new challenge for governments across the world. And as the world’s vaccination numbers steadily rise, we are left with a sobering question: How would the world cope with a future pandemic?

Global Finance magazine’s safest country index factors in the risks facing individuals such as natural disasters, violent crimes, terrorism and war to present a well-rounded analysis of overall societal safety.

Sources: World Economic Forum, The Global Institute For Peace.

The ever-growing battle for technological advantage and supremacy continues. In a year full of advances in artificial intelligence, virtual reality, green technology, Global Finance has a new set of scores and rankings for national technological strength based on a unique fusion of evaluative metrics.

South Korea remains a world leader in technological advancement, again taking the top slot. Its consumer electronics giants invest heavily in research and development, while its citizens combine advanced technological skills with an innovative culture. East Asia is well-represented in the top 20, with Japan, Taiwan and Singapore.

Developed Asian and European nations continue to dominate the top of the rankings. Apart from the United States (2), all the top 17 countries are among the wealthiest countries in one of those two regions. Taiwan jumped up a few spots to #3, due to increasing investment into research and development. Germany—known for its engineering prowess since before World War II—is now actively using that expertise in the field of green energy. Many of the world’s leaders in technological innovation are small political jurisdictions that are less able to rely on rich supplies of natural resources for economic power, such as the Nordic nations, Belgium, Switzerland and Japan.

Israel (6), with its robust startup ecosystem, also gained significantly. The relatively small nation continues to put immense investment into research and development. Israeli companies are advancing rapidly in life sciences, military technology and other sectors, and the country has become a global leader—the world’s sixth largest hub—for raising tech capital.  The UAE was a second Middle East standout, coming in at #18.

Japan (16), on the other hand, fell back significantly in the rankings because the percentage of its population that uses the internet is falling. Japan sports a notable reliance on analog in the public sector, and also declined in its Digital Competitiveness due to a lack of business technological agility and declining international experience in technology.

The world’s most populous developing countries, both expected to see strong growth in technological progress, struggled in this year’s ranking, despite government support, deep scientific knowledge and significant technological expertise in various sectors.

China (41) and India (65) fell back in the rankings, despite prevailing wisdom that both would advance rapidly. China’s internet population, at around 73%, still falls very far below its economic peers such as Russia, Mexico, and Argentina or the group of most technologically advanced countries. While China invests significantly into research & development for critical technologies, it lacks the ability to utilize its population for greater technological advancement. The Chinese government has also cracked down on the private technology sector, limiting and even reducing its reach and size.

India, for its part, has invested very little of its country’s GDP into research and development. While the establishment of the National Research Foundation is designed to help increase investment and support for technological and scientific education and advancement, it may not play the pivotal role that India desires. To round it off, Brazil (55), Indonesia (59), and Russia (44) all continue to rank poorly and have made few if any gains in technological strength. Russia scores above average only in its percentage of population that uses the internet. The war with Ukraine has spurred an exodus of technological expertise, creating potential for a “brain drain” of technological and scientific professionals for years to come.

First, we incorporate two metrics that represent the technological breadth and adoption for a country: internet users as a percentage of a country’s population, and LTE (4G) users as a percentage of the population. This combination illustrates the availability of internet use for the wider population and counters the over-reliance on measuring the strength of only high-tech industries and institutions. The third metric is a Digital Competitiveness Score, created and compiled by the IMD World Competitiveness Center. This conglomeration is based on multiple factors including technological knowledge, current technological strength, and readiness/capability to create and advance new innovations. Essentially, it measures a country’s current technological environment and its prospects for future success.

The final metric is the portion of GDP spent on research and development (R&D), which represents both the government’s investment into the future technological development as well as the desire to compete for future advancement. All of these metrics combine to rank countries by both their vanguard of technological capabilities but also their populations’ mastery of said technologies.

The scores provide some insights into where countries differentiate themselves from those below them. As opposed to one year ago, the differences are now more pronounced in the Digital Competitiveness Score and the Research & Development investment. These factors have seen increasing breadth between the top countries and the bottom countries. Meanwhile, the differences between the top countries and bottom countries have decreased in both LTE penetration and Internet users as a percent of the population. This makes sense as once a country expands its internet and LTE base to nearly 100%, it is impossible to keep going up. Meanwhile, developing countries can gain ground by expanding their internet access.

Some rivalries stand the test of time: the Yankees versus the Red Sox, Barcelona versus Real Madrid, McDonald’s versus Burger King. In East Asia, the rivalry between China and Japan has long dominated geopolitics and economics. However, over the past five decades, the governments of both countries put aside political animosity and instead prioritized trade with one another to facilitate economic growth. In 1972, trade volume between the two countries stood at less than $3 billion USD in current dollars. Fifty years later, trade volume has grown 100 fold to $300 billion spread across a multitude of industries such as computers, heavy machinery, broadcasting and automobiles. Japanese conglomerates exported materials and machinery for China’s infrastructure as well as its nascent consumer electronics market, seizing the opportunity created by China’s 1996 policy of “grasping the large, letting go of the small” which saw the government relinquish control over smaller enterprises in a bid to spur privatization and growth.

Integration into Japanese supply chains  over the past half-century helped transform China into the world’s second largest economy, permanently altering the balance of power in East Asia between the two nations and fueling the assertiveness of China’s leadership on the world stage through so-called “wolf warrior diplomacy.” In recent years, rising tensions between the two—over Taiwan, the disputed Senkaku Islands and US-China frictions—have led to the partial decoupling of their economies at a time when they might need each other more than ever to confront similar demographic challenges. The number of Japanese companies operating in China has decreased by 11% over the last decade and the number of Japan’s businesses listed in the Nikkei index that have a strong dependency on China has fallen. By the same token, China’s President Xi Jinping has turned away from integration with the global economy and towards nationalist, autarkic policies in certain strategic economic sectors like chip manufacturing.

Despite the immense historical, cultural, economic and political differences between Japan and China, both now face the same demographic challenge: a declining and aging population that promises to drag down their economies.Japan’s birth rate now sits at 1.37 births per woman after falling for a decade, well below the 2.1 replacement level required to maintain existing population levels. This, combined with low levels of immigration, have shrunk Japan’s population annually since 2010 and its current population of 125 million people is projected to dwindle to 106 million by 2050 and 75 million by 2100. To complicate matters, Japan’s shrinking population is also becoming disproportionately elderly (age 65 and above). As of 2020, the elderly citizens make up to 28.8% of Japan’s population and will require ever-greater resources for medical care, support, and help with daily living. This growing burden will fall on a dwindling working-age population, likely prompting a fiscal crisis. At the same time, much of Japan’s internal consumption spending is likely to flatline or fall off a cliff. Japanese corporations selling consumer electronics, automobiles, and other standard products will find it harder to sell as much to a smaller pool of consumers, making export markets like China even more valuable to their businesses.

China, for its part, dove head first into a demographic decline of its own making with the infamous one-child policy. Instituted in 1980, the policy not only succeeded in creating a drastic reduction in the fertility rate to 1.67 births per woman, but also created an enduring cultural expectation and standard of a one-child family. As China’s economy grew and the standard of living increased, the government did not revisit or amend this policy until 2015. In 2016, a new two-child policy was announced but the resulting spike in birth rate lasted for only one year and has since fallen below Japan’s to just 1.18. In 2023, China’s population suffered from its first recorded decline in 60 years (although the Chinese government may have been overcounting the population for some time previously).

China faces many of the same economic challenges from its demographic crisis as Japan, only with far less room for maneuver. While China’s GDP per capita has grown from $959 USD in 2000 to $12,500 USD today, it is still a developing country that has a much lower GDP per capita and standard of living than most developed countries. China’s phenomenal economic rise over the past 50 years was fueled in part by favorable demographics: because the country had so few retirees compared to its working age population, the government could devote more resources to investing in infrastructure and also enjoyed a larger tax base. But that demographic advantage is now becoming a liability as China’s pension system is strained by an influx of retirees beginning at ages 60 for men and 55 for women.

As time goes on, China may have bested Japan at aging itself out of economic growth. Previous predictions that China’s economic and demographic headwinds were less serious than Japan’s turned out to be mistaken. As China and Japan begin decoupling economically from one another, it is worth asking if they might not be stronger together since they face similar challenges.

People are willing to pay more to live in cities for the wealth of benefits they typically offer—cultural attractions, quality health care and social activities. Within large cities, one often finds neighborhoods that deliver the comfort of a small town community. Cities are dynamic centers for young people, who seek lively nightlife. Money matters too: The largest cities offer higher pay than small towns or even smaller cities. Accessible cities offer senior citizens the best hospitals. All these combine to make these among the world’s best places to live.

Global Finance’s 2022 best cities to live in ranking is derived from a score that reflects eight distinct metrics contributing to quality of life: economic strength; cultural interaction; livability; environment; accessibility; Covid-19 deaths per thousand for the country; research and development; and annual population growth rate. These factors are all critical for quantifying the quality of life of people living in urban areas. All of the metrics were normalized in order to properly quantify them into a single overall score and provide a measure of comparison.

Where did we get the data? The first six factors (economic strength, research and development, cultural interaction, livability, environment, and accessibility) come from the Global City Power index. This study provides multiple scores that quantify different aspects of city life, including cultural, technological, environmental, and economic factors. The report’s list of cities forms the basis for our decision of what cities to include. The Covid-19 deaths per thousand comes from a combination of Johns Hopkins University and Statista for the remaining cities. The population growth is based on data from Macrotrends.

Amsterdam made a surprising climb from 14th place on the 2020 list to 10th place scoring higher than other European cities such as Vienna, Berlin, and Copenhagen powered by better livability and transportation access scores. Another factor is that makes Amsterdam one of the best places to live is that it is affordable compared to European competitors, Amsterdam residents enjoy manageable monthly rent and house prices as well as plenty of low cost public transportation methods.

New York City is the lone city in America on this year’s ranking due to its strong economy, cultural significance, and research and development. The factors pushing it down from fourth place in 2020 to ninth place in 2021 are the United States’ exceedingly high Covid-19 death rate and this big city’s skyrocketing cost of living, driven mainly by home prices.

Beijing’s rise to a top 10 of the best places to live is a surprise given that it placed 22nd in 2020. Beijing scores poorly on livability—although that has been changing recently—and its high levels of pollution produce a poor environmental safety score. Nonetheless, Beijing’s rich culture attracts visits, and its ranking benefitted from China’s low Covid-19 death rate. With its residents expanding by 2% in the past year, Beijing may have issues, but the city is still growing and evolving.

Paris has suffered a lot recently. France’s Covid-19 death rate has been higher than the global average and Paris’ growth is minimal. However, with strong scores on traditional metrics such as cultural significance and livability due to an abundance of low-cost public transportation options, as well as rich art and cultural attractions, nightlife and amenities, Paris is unquestionably one of the world’s best places to live.

Right behind its fellow Australian city Melbourne is Sydney and they share many of the same strengths: Robust environmental safety, a moderately strong economy that is growing well, and the Australian government’s lockdowns succeeded limiting Covid-19 deaths per capita. Also, stunning beaches, beautiful weather year round, varied outdoor activities and lively nightlife appeal to tourists and locals alike.

Melbourne maintained its 5th place from the 2020 ranking by being strong on environmentalism. It not only sets strict guidelines in a pursuit of zero carbon emissions but it also has a variety of groups aggressively pursuing judicial paths for tougher environmental standards. These characteristics are mirrored in an abundance of outdoor activities and attractions. Melbourne also experienced significant population growth despite the pandemic.

Singapore exhibits similar strengths to the other populous metro areas in Asia, which made this year’s top 10. It scored moderately well in economic strength, cultural attractions, and environmental safety, and successfully limited Covid-19 deaths per capita. The city-state emphasizes education and science. Its reputation as a safe city, with low crime make it among the world’s best places to live.

Using traditional metrics, Shanghai would not have ranked in the top 10 because its scores on economic strength, cultural significance, and environmental safety leave a lot to be desired. What set Shanghai apart is the exceptionally low Covid-19 death figures due to China’s zero-covid policy and its strong population growth. It continues to draw job seekers and tourists.

Tokyo gets second place as it scores very high on combatting Covid-19. It also continually demonstrates a passion for research and development into tech sectors and its immense public transportation system offers a high level of accessibility. Even so, Tokyo has a weakness in one key area: It is one of the few cities among the top 10 to suffer population decline in the past year. Still, although it is unquestionably a big city, many of its various wards feature the type of neighborhood bars and warm community one finds in a small town.

#1 | London, United Kingdom

London claims first place with high scores across the board for everything except Covid-19 as the U.K dealt with significant surges in case numbers from the beginning of the pandemic to as recently as January of 2022. Nevertheless, London’s strength in culture, accessibility, amenities, diversity, and surprisingly strong population growth pushed it above and beyond every other city in the world. Living in London

Tailoring our methodology to the current phase of the Covid-19 pandemic led to some surprising results in the 2022 edition of Global Finance’s best cities ranking (and it is important to note that past performance is no guarantee of future success in combatting Covid-19 deaths given the unpredictability of variants like Omicron emerging). Many European cities that scored highly in traditional metrics—including Berlin (16), Helsinki (17), Stockholm (18), and Zurich (19)—had high Covid-19 death rates as well. These cities also had relatively low population growth, as has been common across much of Europe recently. U.S cities such as Los Angeles (35) and Boston (41) have faced the same circumstances of high Covid-19 deaths per capita and low population growth. These factors led to many cities in the developed Western world to score poorly in this year’s rankings.

Population growth combined with low Covid-19 death rates are the key factors for why some Asian cities surged in the rankings compared to where they were in 2020. Hong Kong (11), Dubai (12), Seoul (13), Bangkok (22) exhibited strong population growth and did well in limiting Covid-19 deaths. In China, strict lockdowns in specific cities were so successful in preventing Covid-19 deaths that Beijing and Shanghai catapulted from 21^st and 22^nd place, respectively, in the 2020 ranking and into the top 10 of this year’s ranking.

The extreme divergence of population growth among the world’s major cities was another significant factor in this year’s ranking. Cities across the United States, Japan, Italy, and Russia have seen their populations stagnate or decline, leading to gloomy forecasts that for future generations they will be less lively, less diverse, and less wealthy places to live. At the other extreme, cities with high population growth rates such as Kuala Lumpur (24), Johannesburg (48), and Cairo (38) were held them back from reaching the top 10 by their poor scores on the other seven metrics.

Global Finance’s 2020 best cities ranking is based on a score that reflects a comprehensive list of eight unique factors. These are: economic strength; research and development; cultural interaction; livability; environment; accessibility; GDP per capita (nominal in USD); and COVID-19 deaths per million for the country. Each of these factors brings with it a critical way of understanding the quality of life in the cities and each of the metrics was normalized in order to properly quantify them into a single overall score. It is important to note that we weighted the Covid-19 deaths metric by a factor of three in order to underline how a once-in-a-lifetime pandemic affected which cities would be best to live in.

Where did we get the data?

The first six factors (economic strength, research and development, cultural interaction, livability, environment, and accessibility) all come from the Global City Power index, which provides an in-depth view of and scores different aspects of city life, including cultural importance and accessibility. Their report’s list of cities forms the basis for our decision of what cities to include in our list. The nominal GDP per capita comes from the World Bank Database. The Covid-19 deaths per million comes from a combination of Johns Hopkins University and Statista for the remaining cities.

Sydney made it into the top 10 thanks to a high scores on environmental factors and Australia’s efficient effort to combat COVID-19. Australia was one of the first countries outside of China to impose lockdowns and social distancing rules to stop uncontrolled spread of the coronavirus.

Berlin ranks ninth on our list, scoring slightly above average across the board on quality-of-life metrics. Germany’s comparatively low COVID-19 death rate helps place the city above where it would have ranked before the pandemic.

Seoul ranks eighth in this list mostly due to its strong focus on research and development as well as South Korea’s early and aggressive response to Covid-19. South Korea has often been help up as an example of how to effectively deal with the pandemic while maintaining strong economic performance because their response did not require shutting down non-essential businesses or entire cities to stop the spread of the coronavirus.

Paris, usually ranking amongst or near the top of best city lists, ranks seventh in the year of the coronavirus. Paris has a strong cultural importance that can be felt throughout the city. It also scores highly in livability and accessibility. However, like many other European cities, its ranking suffers the difficulties combatting Covid-19 as France began to experience a second wave of infections.

Frankfurt places sixth due to Germany’s strong response to COVID-19 and the city’s extremely strong performance in just one metric: GDP per capita. Frankfurt has one of the highest GDP per capitas of any city in Germany at slightly over $106,000 in USD. Germany also has outperformed many other neighboring European countries in its coronavirus death rate.

Melbourne is an interesting and competitive fifth place as it scores largely slightly above average on every metric except for COVID-19. Melbourne also scores highly in the environmental metric after setting strict and aggressive targets for zero-carbon emissions.

New York City ranks fourth, below its historical rankings, as it scores well in its economy, research and development, and cultural interaction. The main factor pushing it downwards is the same that was true of London: high per capita COVID-19 death rate. The United States has struggled to contain the virus and has lost more than 200,000 people.

Singapore places third in the ranking with relatively moderate scores in most metrics but it has performed well in countering the consequences of COVID-19. So while Singapore actually ranks below the average on livability, and only slightly above average on the economy and research and development, its response to COVID-19 has resulted in more than 99% of infected people recovering.

London ranks as second with extremely high scores in the economy and cultural interaction metrics. In normal years where COVID-19 was not a factor, London would have ranked number one. However, the United Kingdom’s struggles with COVID-19 and the high number of deaths per capita significantly decreased its score and it is only by its resilience in other metrics that it remains in second place.

#1 | Tokyo, Japan

Tokyo ranks first as the city with the highest quality of life in 2020 due to its overall relatively good scores in most metrics and Japan’s strong response to COVID-19. Japan has had very low case counts, a subsidized advanced transportation system, and an overall high quality of life.

Because of the critical importance of COVID-19 in affecting quality of life, there are results in the ranking that would be surprising in any other year. Many highly developed European cities such as Brussels (43), Milan (40), Barcelona (38), and Madrid (35) are now ranked towards the bottom. These cities are often considered to have high quality of life and score respectively well in Cultural Interaction, Livability, and Environment. However, the Covid-19 deaths per million in Belgium, Italy, and Spain are very high as these countries faced both the initial wave and are currently experiencing a limited second wave. The spread of COVID-19 and the subsequent deaths have pushed these cities towards the bottom of the list.

The COVID-19 deaths, however, are also the reason why many cities in East Asia are punching above their weight. Tokyo (1), Singapore (3), Seoul (8), and Hong Kong (11) are ranked respectively high because of the extremely low spread of Covid-19 and the low death rates per capita for these countries. In fact, Japan, Singapore, Hong Kong, and South Korea have often been praised as models for dealing with the virus. In Tokyo and throughout Japan, nightlife has largely reopened despite earlier concerns of the spread of the virus. The same is true for Seoul and South Korea, which was able to avoid a large economic fallout while maintaining relatively low case counts. The low rate of COVID-19 deaths is also the main reason why Kuala Lampur (23) and Bangkok (32) and are ranked above many U.S cities such as Los Angeles (33), Boston (36) and Washington D.C (39) as the United States has a high rate of COVID-19 deaths.

Mounting evidence indicates that auto lenders have been increasingly lowering standards and taking on more risk while issuing auto loans. Many are known to have lax verification norms and have a lower bar set for credit checks and approvals.

Take Santander, a major lender for auto purchases, for example. A Moody’s report earlier in May this year found that it had verified income for only 8% of its borrowers. Clearly, Santander has little information on the creditworthiness of its borrowers and may have classified many risky loans as safe.

The Office of the Comptroller of Currency too issued a report on Semiannual Risk Perspective for Spring 2017 finding evidence that many auto-loan companies were loosening their underwriting restrictions and were taking greater risks by giving long-term loans with higher interest rates with a view to capture the auto loan market. The report also confirmed that auto loan lenders were seeing increased losses.

This trend is reminiscent of the mortgage sub-prime crisis that saw increased risk coupled with lower recovery rates as well as higher losses for both bank loans and securitized auto loans. As profits decline for creditors and banks that underwrite these loans, they may try to untie themselves from the auto-loan market, leading to a loss of confidence and crisis in the financial system.

A crisis in the auto loan market could have long-term negative effects on consumption and employment. If the rates of default increase, people struggling to make payments may have their cars repossessed. They would be left without a means of getting to work and do everyday chores further worsening their economic state. With a decline in the rate of car ownership, the overall levels of consumption and employment may decline for a protracted period of time.

Despite the obvious perils of a subprime auto loan crisis, the relatively smaller proportion of auto loans to overall consumer debt makes it improbable that its impact will be as widespread as the housing subprime crisis. As per Federal Reserve Bank of New York figures, the total household debt in the United States had reached $12.7 trillion in the first three months of the year. Of this, housing comprised 71.4%, while auto loans came in at 9.2%, a tad under student loans that made up 10.6% of the debt.

One can also take a little heart from the Federal Reserve’s Report on Household Debt and Credit for the first quarter of 2017 that found the average auto borrower to have become more credit worthy over time. The report pointed that the median (50th percentile) credit score for a person with an auto loan stands at 700 now and has been improving since 2004, when it stood at 675. The 25th percentile mark too stood at nearly 620 and has been improving since 2004.

While the comparative median and 25th percentile credit scores for auto loans are lower than those for mortgages,  they do not indicate an increased likelihood for defaults, as car payments are usually much smaller than mortgage payments. Also, the median mortgage credit score had decreased significantly before the mortgage crisis unlike the auto-loan market.

Another figure to watch for is the rate of delinquency for auto loans where there are no payments for 30 days or more. The proportion of auto loans transitioning into delinquency has been relatively stable at 7.6%. It has marginally increased since 2013 but has stayed constant from its level of 2004. The portion of the balance that is now delinquent (90 days or more of no payment) is about 4%. This has in fact decreased in recent years.

It seems unlikely that the auto-loan market will soon cause any significant economic or financial crisis in the US.  Risky lending practices and an increase in subprime auto loans will remain a source of worry though. After all, it was David that brought the Goliath to its knees.

If you had correctly predicted, 30 years ago, the current standing of the Japanese and Chinese economies, you would have sounded ridiculous.

In the early 1980s, both economies were growing at extreme paces. But China was a nation mired in poverty ($250 GDP per capita) that had just begun to open itself to trade, foreign investment, and private industry. Japan, on the other hand, was an industrial and technology behemoth that had taken its place as the second-largest economy in the world, with the highest GNI per capita by 1990.

The picture is much different today. China remains a dynamo, though at times wobbly, while Japan had been stagnant for more than a decade. Will China’s development follow Japan’s into stagnation? What led to the current wide divergence in economic situations and what does it mean for the future?

Three major forces—deflation, over-valuation, and aging demographics—are at play in both economies. Yet they have been a plague in the Land of the Rising Sun, while the Middle Kingdom has gone relatively unscathed due to mitigating factors. Japan may have hit a financial “Great Wall,” but China still has room to maneuver.

FORCE 1: DEFLATION

Japan’s economy has suffered—and continues to suffer—from deflation, which is slowing the economy to a snail’s pace. Deflationary interest rates—zero or even negative—have been driving consumption down as consumers postpone purchases in anticipation of lower prices. At the same time, the lack of interest payments on accounts combined with a growing part of the population drawing down savings to fund retirement has reduced the savings rate to 23.6% of GDP in 2015, from 32% in 1996, according to World Bank data.

The deflation has continued despite decades of efforts by multiple Japanese administrations (including Prime Minister Shinzo Abe’s Abenomics) to forcefully induce inflation through quantitative easing (central bank bond purchases to increase the money supply). The trend seems likely to continue as the 2015 GDP growth rate (0.47%) and inflation rate (0.79%) were both well below targets, and while 2016 numbers edged out expectations in the last two quarters, yearly GDP growth of just 1% is hardly something to crow about. 

China, meanwhile, has not suffered from deflation and seems unlikely to experience this problem in its near future. The Chinese government fixes its currency and has purposely devalued it against the dollar in order to lower the relative prices of its exports, thus encouraging inflation of its currency. Over the past 10 years, China has reduced its high inflation rate to an average of about 3% per year. Data from the National Bureau of Statistics of China show steady growth in consumer spending since at least 2006—right through the financial crisis, even—and the savings-rate peak of more than 50% of GDP, achieved in the late 2000s, has already slid to 48% as more people engage in luxury consumption.

FORCE 2: ASSET BUBBLE

Japan’s economy suffered from a massive asset price bubble based on speculative interests and faulty investments in 1991 that destabilized its entire economy. The degree of speculation on assets such as land was so high that prime real estate in the fashionable Ginza district sold for $139,000 per square foot—leading to calculations that the land comprising the Japanese Palace grounds was worth more than the entire state of California. Japan’s massive banks made extremely risky investments and once the losses became realized, the banks became insolvent and unable to lend. This led the stock market to collapse in 1991. Even now, the Nikkei index has only recovered to 40% of its high.

Against such recent history, the fears regarding over-valuation in the Chinese real-estate and stock markets are rational. Still, the risks there are not nearly as extreme as in Japan. China’s largest bourse, the Shanghai stock exchange, fell by large amounts in both 2015 and 2016 and fell to a low of 30% below its previous high. Over-eager investment and borrowing to finance the investment had led to a stock-market bubble and many predicted it would totally collapse. However, the Shanghai Exchange now stands at 50% above the pre-bubble value, suggesting that the market has weathered the storm and could do so in the future.

China does have the potential to house an over-valued real-estate market. Years of massive construction projects to keep the economy humming have led to an oversupply of buildings priced out the reach of Chinese consumers. Massive sites with highly valued stock lie empty—the so-called “ghost cities” documented so hauntingly by photographer Kai Caemmerer in his internationally acclaimed series “Unborn Cities.” A correction would force investors to face up to the real value of property in China, and possibly lead to capital flight. In response, the Chinese government is easing restrictions on home loans to improve affordability.

Concerns about Chinese real-estate market, though warranted, may miss the bigger picture of the market within China, which still has a constant flow of people from rural areas moving into the cities increasing the demand for urban real estate. Since this flow of people is not expected to abate, urbanization rates will keep increasing, potentially building in sustainable demand that limits the risk of Chinese real estate becoming too wildly over-valued.

FORCE 3: DEMOGRAPHICS

Japan’s aging demographics present a clear problem limiting the nation’s potential for economic growth. Japan’s age-dependency ratio (ratio of those who are dependent on others to those who work) went from 43.4% in 1990 to 64.5% in 2014. In fact, due to low birth rates (well below replacement rate for several years), Japan is the world’s fastest-aging country, with one of every three people being over 60 years old, according to the United Nations World Population Ageing report. Japan also has such low birth rates that its population is expected to decrease from 120 million currently to 87 million by 2060. This portends a dramatic increase in the number of people dependent on others for care and income, coincident with a decline in the overall labor force—a trend that bodes poorly for economic growth.

China already has the world’s largest population of older people, yet it does not suffer nearly as harsh a demographics problem as Japan. Its age-dependency ratio has declined from 51.94% in 1990 to 36.58% in 2015, signaling a major move towards employment age population. There are signs of difficulties ahead, however. A UN report predicts that by 2030, China will rise to sixth in the world for aging, with 34% of its population aged 60 or older. However, when the government lifted its one-child rule last year, the birth rate shot up 11.5%. Without negative population growth, China’s demographics are much less threatening than Japan’s.         

In sum, although it is tempting to make superficial equivalencies, China’s woes concerning economic growth are far different from Japan’s. Japan is an extreme case of how a bursting bubble followed by deflation and exacerbated by demographics can prevent economic growth for long periods of time. While China has over-valued stock and real-estate markets, it does not suffer from the threat of deflation or an immediate demographics problem that will cause economic growth to stagnate. Japan may have hit its limit, but China seems to have room to grow.

Although the frequency of civil wars has fallen in recent decades, civil conflict in the Middle East has become ever more prevalent since the Arab Spring. A number of nations, including Syria, Tunisia, Libya, Iraq and others, have experienced either civil war or low-intensity civil conflict. The conflicts have made it difficult to measure the economic growth of these countries.

In this example, we will use the case of Syria to demonstrate how the problems that stem from civil conflict affect both the population and the GDP, the two key figures to establishing the wealth of a country. We consider GDP per capita to be the measure of economic performance, with GDP per capita growth rate signifying economic growth. Yet these two statistics—overall wealth and the population that wealth is spread among—become significantly harder to obtain.

The civil war in Syria, which began in 2011, has created utter chaos for international institutions that measure population. Prior to the conflict, the United Nations Department of Economic and Social Affairs performed this task. However, the increasing violence has created a need for more funding, and thus the European Union commissioned a population study on Syria.

Due to risks stemming from the civil conflict, these institutions are restricted in their abilities to sample populations in certain areas. In more extreme cases of civil war, they are unable even to have personnel on the ground. Needless to say, this impedes accurate measurements of the population.

And keeping that count up to date matters because war causes rapid fluctuations in population. Prior to the conflict, the population of Syria in 2010 was put at 20.7 million. Since then, approximately 4.8 million people have fled to other countries and 7 million more have fled their homes as domestic refugees, making it difficult to determine the population of the country. Estimates of the population after the conflict range from 16 million in 2014 to 18.8 million. The war has also created drastic changes in the birth and death rates, significantly affecting demographics.

Measuring the GDP of Syria—or any war-torn country—presents many of the same problems as measuring the population. The international institutions that try to measure GDP must quantify the value of the country’s output at a given point in time. In 2010, the GDP of Syria was measured at $60.5 billion, according to the UN. Estimates of the GDP in 2014 approximated $34.2 billion. These fluctuations make it more difficult for institutions to provide accurate estimates of GDP.

In addition to being extremely volatile, war-time GDP is often highly dependent on fast-changing factors such as foreign aid or destruction caused by the conflict. The GDP of Syria before the battle in Aleppo, for example, may very well be significantly different from the GDP after the battle due to the destruction of property, infrastructure and the reduction of new goods and services.

What’s more, military spending in a conflict warps GDP as a measure of the economic well-being of the populace—the true meaning of economic performance. The current Syrian GDP relies heavily on military spending and foreign aid. In 2012, the United States sent $107 million in aid for various humanitarian purposes. This aid does not include the value of the weaponry sent to arm the Syrian Free Army and other rebel groups. Similarly, Russia has sent the Syrian government immense amounts of aid in the form of weaponry and advanced military hardware. Yet clearly, the civil war has led to the deterioration of consumption and services for most people and the military spending and foreign aid do not compensate in terms of economic performance. In essence, civil conflict causes the GDP of a country to consist more of military spending and other spending that does not contribute to or indicate economic well-being of the people.

It is important to be wary of the estimates of economic growth for countries suffering from civil conflict. The GDP per capita of the country may not provide an accurate measure of the country’s economic performance for multiple reasons. In general, civil conflicts prevent institutions from being able to accurately measure important statistics and create so much volatility that the measurements are likely to be inaccurate.