Skyrocketing debt brought about by the Covid-19 pandemic could reach 260% of global GDP by the end of 2021, but according to S&P Global Ratings, low interest rates will help bring the situation under control.
Global debt rose to a record high of nearly $300 trillion in the second quarter of this year, data from the Institute of International Finance (IIF) shows.
Total debt, including government, household, corporate and bank debt, soared $4.8 trillion to $296 trillion at the end of June, $36 trillion above its pre-pandemic levels.
According to S&P’s managing director and lead analytical manager, Vera Chaplin, this “debt buildup was necessary given the policy response during the pandemic,” as cited by Bloomberg.
Speaking at the Asia Briefing Live forum co-hosted by Bloomberg and Asia Society Australia on Thursday, Chaplin predicted that more defaults may be in store, triggered by higher leverage and weakened credit metrics amid the ongoing economic recovery.
As for the latter, Chaplin noted that the recovery won’t be complete until vaccines become widespread enough to give people the freedom and comfort to move about and travel. The analyst also stated that the debt appears to be manageable due to current low interest rates.—Agencies