COVID-19 Debt Deluge: Project Syndicate

Crises immediately expose any weaknesses in public infrastructure, and COVID-19 will reveal needs in public health and economic systems. Societies realize that privatization and cost-cutting for health care for vulnerable populations expose all citizens to infection, explains Jayati Ghosh. Analysts anticipate a recession with supply chain disruptions and entire regions locked down. “A world economy already suffering from insufficient demand – owing to rising wealth and income inequality – is now vulnerable to a massive supply-side shock,” Ghosh writes. She warns of a potential debt crisis that could prevent full economic recovery. Loose monetary policies with low interest rates encouraged borrowing and hiked asset prices. “Asian financial markets were vulnerable even before the current shock, owing to falling margins, higher risks, and an excessive dependence on banks and shadow banking (a problem that has already been exposed in India),” Ghosh explains. “ Worse, a significant share of stressed debt in the region is held by energy, industrial, and utility companies, all of which are directly affected by recent output and oil-price declines.” She warns that one country cannot solve the problems on their own, and she urges global leadership that coordinates targeted, forward-thinking policies, concluding: “It is time to start thinking about debt resolution and restructuring.” – YaleGlobal

COVID-19 Debt Deluge: Project Syndicate

COVID-19's economic impact exposes vulnerabilities in health and economic systems and may set stage for a debt meltdown, with Asian economies on the frontlines
Jayati Ghosh
Monday, March 16, 2020

Read the article from Project Syndicate about the COVID-19 pandemic exposing problems and exacerbating a debt crisis.

Jayati Ghosh is Professor of Economics at Jawaharlal Nehru University in New Delhi, Executive Secretary of International Development Economics Associates, and a member of the Independent Commission for the Reform of International Corporate Taxation.

	Total	Government	Private Currency crisis 1998	184	66	118 	187	67	120 2000	189	67	123 	191	66	125 Debt wave  2002	192%	 2004	198%	, 2006	198%,	Global debt crisis  2008	197%;	 Debt wave, euro crisis  2010	209%; 2012 212%;  Era of negative rates,  2014	215%, 2016, 222%	 2018, 227%	COVID-19  2020

Heavy debt load: Global debt as a percentage of GDP has steadily climbed and created asset bubbles - and societies must learn from crises to invest in health, education, economic security and other long-term programs (Source: International Monetary Fund, World Bank)

© Project Syndicate – 2020