Mar 16, 2020 - Economy & Business

The world's debt situation is much worse than in 2008

Illustration of scissors cutting a dollar

Illustration: Rebecca Zisser/Axios

Perhaps the biggest risk for financial markets is the potential for wide-ranging debt defaults, particularly as companies have significantly increased their debt load and more are rated at the bottom of the investment grade ratings scale.

Why it matters: The world's companies are in a much worse position amid the coronavirus pandemic than they were ahead of the global financial crisis.

The state of play: Economists at the Institute of International Finance write, "Corporate debt is already very high relative to earnings — and earnings prospects are deteriorating: At nearly $75 trillion, the fast-growing mountain of global corporate debt (ex-financials) is around 93% of global GDP."

  • That's significantly higher than the level of corporate debt in the run-up to the 2008 global financial crisis (75% of GDP).
  • Worse, IIF notes, "Some of the highest debt burdens are in sectors with weak and volatile earnings profiles."

Go deeper: The world's fast-growing mountain of debt

Go deeper