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July 15, 2020

Economic stimulus plans could slow post Covid recovery

By Paul Dennis

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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