Analysis: A world debt crisis is not imminent, despite Covid-19

How the new debt taken on by governments is used will be a key factor determining the global economic recovery from the pandemic

28th October, 2020
Analysis: A world debt crisis is not imminent, despite Covid-19
The short-term outlook remains worrying, particularly for borrowers at the lower end of the credit scale or in vulnerable industries, but a large-scale debt crisis may not be nearly as likely as many fear. Picture: Getty

As countries, companies and households confront the Covid-19 pandemic’s economic fallout, many market watchers are sounding the alarm about rapidly rising leverage worldwide.

And for good reason: in an acceleration of a years-long trend, the debt-to-GDP ratio among these three sets of borrowers is set to swell by 14 per cent this year, to a record 265 per cent.

But while this has raised the risk of insolvencies and defaults, particularly among corporations, S&P Global...

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