‘More Governments May Default In Debts Due To Coronavirus’
An Economist said on Wednesday that there is a huge possibility that a greater number of nations may default in their debts in the coming 12-18 months. Due to coronavirus, the governments all over the world are forced into a corner due to the necessary increase in public spending and almost no revenue coming their way.
“I do think we will see some issues there, possibly we could see a euro zone crisis come back with countries like Greece or Italy … likely to be at the center of that,” Simon Baptist, global chief economist at consultancy The Economist Intelligence Unit told CNBC.
“Across the emerging world, I’ll pick out countries like South Africa and Brazil as being likely to suffer a further crisis as a result of this,” he added. “And, of course, Argentina has effectively gone back into sovereign default already.”
Talking about the coronavirus pandemic, it has affected everyone in the world and has infected over 1.9 million people in the world. This spike has led the governments all over the globe to take necessary actions to guard the health care services. Major actions include the lockdown and shutdown that have been announced.
“A lot of emerging markets are reliant on international investors, international financial flows to get the funding to run a budget deficit, they find it harder to borrow in local currency — although there are a few exceptions,” said the economist.
“At the moment, with this big turn to risk aversion in international markets, even though there may be some emerging world governments that would like to spend more, they’re not going to be able to get funding.”
The US is also under economic pressure as the nation is under a complete lockdown due to the US being the most affected nation until now. Major companies are getting rid of employees to tackle the financial loss. It remains to be seen, how long does this pandemic lasts and the debt defaults.