The Covid-19 or coronavirus pandemic and its aftermath has pushed the global debt higher by $32 trillion in 2020 to $290.6 trillion led by government and non-financial corporate debt, and will continue to rise in 2021, said the latest release by Moody’s Investor Service. The persistent decline in productivity growth, it believes, poses medium-term challenges to debt sustainability with Africa and the Caribbean being the two most vulnerable regions in the emerging markets or EMs.
Moody’s said, “Despite an uptick in defaults, policy support prevented a debt crisis in emerging markets, but the pandemic and its aftermath will challenge their debt-servicing capacity. Advanced economies have more fiscal space but will face productivity and demographic challenges.”.
That said, the recovery in the global economy from the coronavirus pandemic’s aftermath will be staggered with the United States leading the recovery, while services-dependent Southern European economies will lag. Despite the rise in non-performing loans, banking systems entered the covid-19 pandemic with stronger capitalization ratios and will remain resilient, the rating agency said.
Government debt, according to Moody’s surged to 105 percent of global gross domestic product or GDP in the fourth quarter of 2020 (Q4-2020) from 88 percent before the coronavirus pandemic, its highest level since the aftermath of World War II.
On the other hand, household debt, rose to 66 percent of GDP from 61 percent at the end of 2019, partly reflecting loan moratoriums and the resilience of residential real estate markets through the pandemic, the rating agency said.