Economic stimulus plans could slow post Covid recovery

15th July 2020 (Last Updated July 15th, 2020 09:16)

15 July

Global debt levels have been increasing due to the Covid crisis, with those of the G20 economies expected to grow by 120% more than the level seen post World War II.

Daniel Lacelle, Chief Economist at investment services provider Tressis, tweeted his views on the increasing global debt levels due to Covid-19.

He suggests that an increase in public spending through stimulus plans combined with a fall in output could drive the global debt to approximately 105% of gross domestic product (GDP).

Government and private debt together increased by more than 35% of GDP, much higher than the 20% witnessed following the 2008 crisis.

Lacelle opines that the new debt will not help economic recovery but will result in a prolonged recovery since most of it is meant for a cyclical boom rather than targeting the new crisis caused by Covid-19.

He adds that countries that have not fallen into the massive government spending trap have recovered faster.

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