Indebtedness around the world: Is the sky the limit?
The COVID-19 pandemic has left the world a legacy of sky-high debt. Public debt to GDP ratios now match those observed at the end of World War II for advanced economies, and exceed the previous records of the late 1980s for emerging economies. Moreover, for both country groups, non-financial corporate debt ratios have never been higher.
In this context, the article addresses questions such as:
- What are the key drivers of global indebtedness, especially since the global financial crisis, and what has been the impact of COVID-19? How is debt linked to the low interest rate environment and economic growth?
- What are the various disadvantages and risks associated with high debt levels? How do these risks vary across country, sector or firm characteristics?
- What are the policy options to reduce public and corporate debt burdens, or at least keep them under control?