Advanced economies’ capacity to reverse higher debt burdens will drive credit impact
June 23rd 2020 (8.05mins)
Marie Diron from the Sovereign team and Research Writer Natasha Brereton-Fukui discuss the vulnerability of sovereigns that do not reduce debt to GDP after the coronavirus pandemic
eases. Sustained higher debt burdens would increase the risk exposure of sovereigns with
weaker credit quality to future economic or financial shocks.
Sovereigns – Advanced Economies: Coronavirus will raise debt burdens; credit differentiation in capacity to reverse shock
Generally strong debt affordability will offset the rating implications of a one-off increase in debt burdens, but eventual ability to reduce the debt will differentiate credit profiles.