Investment Institute
Macroeconomic Research

The emerging market COVID-19 debt surge – no crisis on the horizon, yet

  • 18 November 2020 (3 min read)

Key points

  • 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.

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