Macro & Investment Insights
The emerging market COVID-19 debt surge – no crisis on the horizon, yet
- As with advanced economies, the pandemic has led to a massive increase in public spending in emerging markets
- Debt levels have been rising in developing economies since the previous financial crisis, but until recently had been in private corporate debt rather than government debt
- Rising public debts were generally not perceived as an immediate threat before the pandemic with falling interest rates containing debt servicing costs
- Emerging market sovereigns have increasingly focused more on domestic issuance, which has reduced their dependence on foreign exchange flows
- Financing issues have surfaced for some fragile countries. Several defaults and restructurings have already taken place
- Among the bigger emerging markets, we take a closer look at debt sustainability in Brazil, South Africa and India.