Check back to a post from February 2020 about the Global Debt Wave. The worry was and is that global debt was reaching crisis levels similar to previous recessions. That was bad enough. Then corona hit. A common response from countries has been to stimulate the economy by distributing funds to people and businesses. This is happening at the same time that tax revenues are probably going to fall, social service costs are rising, and economies are in recession. What was bad is now worse.
“According to the United Nations Conference on Trade and Development, developing countries’ repayments on their public external debts will cost $2.6-3.4 trillion just in 2020 and 2021 alone. Hence, market analysts now suggest that almost 40% of emerging- and frontier-market sovereign external debt could be at risk of default in the next year.” – World Economic Forum
Recessions are considered inevitable after long recoveries. The recent recovery set records for longevity. The worry is that the higher the highs, the lower the lows. If so, this recession could linger longer as countries try to curtail the pandemic while also healing what was already an ailing economy. At the same time, people are relying more on borrowing as jobs and wages have been interrupted. It looks like tough times, ahead. Whether those tough times will inspire change is uncertain, but we may be approaching or already in an economic catharsis.
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