Vulnerability from Debt in the Coronavirus Crisis

Publication date: 26 May 2020 | Publication type: Policy Paper | NIESR Author(s): Naisbitt, B

Abstract

After a period of deleveraging following the financial crisis a decade ago, the past five years have seen private sector debt rising again in both advanced and emerging economies.  Public sector indebtedness, too, is generally higher than five years ago.  The increase in debt was, before the coronavirus pandemic, generally seen as creating a potential vulnerability to increases in interest rates.  The coronavirus shock and the measures taken to combat it have changed the focus of vulnerability, as they have created a severe cashflow shock to companies and an income shock to households, as well as raising public sector debt further.  This paper examines recent trends in debt across sectors and countries and discusses policy issues arising from the vulnerabilities resulting from the recent increase in indebtedness.