Emerging market debt trouble? Debt surge weakens resilience
Article information and share options
Emerging markets' sovereign debt is at the highest level for a century after the COVID-19 crisis, weakening their economic resilience.
- Emerging market government debt rose by 10ppt y-o-y in 2020 to an average of 65%.
- Weakened fiscal standing is creating downward pressure on sovereign credit ratings.
- Rising inflation and upcoming interest rate normalisation add to concerns over debt sustainability.
- Public debt loads are forecast to rise further, implying little fiscal policy space and weaker economic resilience.
- Exchange rate shocks can raise inflation and thus raise insurance claims costs, while rating downgrades can worsen insurers' capital position.