- The world economy will be exiting the pandemic weighed down by much bigger debts and increased inequality that could hobble growth in the longer term.
- That was one of the memes making the rounds at the annual meeting of the American Economic Association that winds up on Tuesday.
- While global growth is widely expected to strengthen as more people are vaccinated, top economists at the virtual three-day conference focused on the glaring inequities.
A recent news report published in Bloomberg Quint deals with the turmoil the world is facing with regard to the economy. Rich Miller gets more insights on this topic in this article.
Debt Burden
Covid-19 has “exacerbated inequality markedly which also raises the issue of financial fragility,” said World Bank chief economist Carmen Reinhart.
Many lower-income U.S. households, for example, hold a lot of debt and could find themselves squeezed as temporary moratoriums on mortgage and rent payments end, she said.
Global Consequences
“Many countries were over-indebted before the pandemic and the marked declines in their incomes mean they’re going to have difficulties servicing the debt,” he said.
The U.S. and other wealthier nations though will not be immune to having to take action to rein in surging government debt once the coronavirus crisis has passed, according to former White House chief economist Christina Romer.
The U.S. budget deficit will hit $2.3 trillion in the fiscal year ending on Sept. 30 — equivalent to more than 10% of gross domestic product — following a $3.1 trillion shortfall in fiscal 2020, according to the Committee for a Responsible Federal Budget.
“When we are through the pandemic we are going to need to get our fiscal houses in order,” said Romer, who is now at the University of California, Berkeley. “We’re going to need to get our debt loads down mainly so we’ll be in a position to deal with the next crisis, pandemic, or whatever when it comes.”
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Source: Bloomberg Quint
