Public debt due to Covid-19 pandemic projected to burden societies for several years, according to leading macroeconomic influencers

GlobalData Thematic Research 8 May 2020 (Last Updated May 8th, 2020 08:45)

Public debt due to Covid-19 pandemic projected to burden societies for several years, according to leading macroeconomic influencers

Public debt concerns are being voiced by leading macroeconomic influencers. Governments across the world are providing stimulus packages to protect people from the impact of the Covid-19 pandemic. Although these packages are essential, as millions have lost their jobs due to lockdown measures, it may lead to huge levels of public debt. The consequences of the debt are expected to impact economies for a long time.

David W Versailles on public debt

David W Versailles, an economist, shared an article on how public debt in advance economies will reach high levels amid the Covid-19 pandemic.

The article notes governments should find a balance between stimulus and restraint as too much public debt can burden societies for years to come.

Claudia Sahm on unemployment

Claudia Sahm, a macroeconomist, tweeted that an additional 3.2 million workers filed for jobless benefits between 26 February and 2 May. She added that based on the claims filed since 1 March, the estimated unemployment rate is at 23%.

Sahm shared a chart depicting the unemployment rates between 1950 and 2020, which shows that 2020 has the highest levels of unemployment rates.

Daniel Lacalle on stagflation

Daniel Lacalle, an economist and author, shared his article on next crisis waiting for countries across the world including deflation to stagflation. In the article, he notes that the stimulus packages, liquidity injections and public spending programmes may eventually cause deeper problems leading to a prolonged recovery.

Lacalle shared a few ways in which governments can address the damage caused by Covid-19 pandemic. He noted that governments should eliminate taxes throughout the lockdown period and keeping supply chains open.

Stephany Griffith-Jones on recession

Stephany Griffith-Jones, an economist, shared an article detailing the warnings issued by the Bank of England of a deep recession in the UK. The article notes that the UK economy will shrink by 14% in 2020, provided lockdown measures are eased in June.

The economy contraction will be sharpest for the UK since 1706. Although the economy is expected to rebound to 15% in 2021, the size of the economy will not be the same as before the crisis until mid-2021.