Feature article: Soaring corporate debt is a risk to global growth

摘要

▀ Corporate borrowing is accelerating as a result of the coronavirus crisis. In part, this is a healthy development as firms look to ride out a period of low or even zero sales. But it also brings potential risks to growth, especially in the longer term, including via lengthy balance sheet restructuring that hurts investment and productivity growth. ▀ In the advanced economies, we estimate the aggregate corporate debt/GDP ratio could rise as much as 10ppts in 2020, to 95% of GDP ‐ well above the 2009 peak. Debt service ratios may also rise into risky territory despite low interest rates. Risks look especially elevated in France and Canada. ▀ Evidence for both advanced and emerging economies suggests high corporate debt levels can damage growth. Highly indebted firms tend to invest less in both the near and medium terms, and some estimates suggest the rise in aggregate debt this year could cut GDP growth by up to 0.2% per year. ▀ The coronavirus crisis may also crystallise some pre‐existing risks in corporate debt. Despite government assistance, defaults by low‐rated firms have started to rise and commercial real estate prices are falling. ▀ Sectoral concentrations of risk may also be intensified and new ones created in industries hit hard by the virus like energy and consumer discretionary sectors. ▀ Emerging market corporate debt is also on the rise ‐ sharply in some cases. In some economies, this mostly reflects exchange rate effects. But negative balance sheet effects of this kind are also a risk to growth.