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Data: IIF; Chart: Axios Visuals

The number of business bankruptcies and insolvencies in most countries has declined this year through the coronavirus pandemic as the world is seeing far fewer bankruptcies than it did in 2019.

Yes, but: That is largely thanks to assistance from central banks and government measures restricting things like foreclosures.

Why it matters: When the smoke clears the world is likely to be looking at a sizable increase in the number of zombie companies — firms that owe more on debt than they generate in profits but are kept alive by relentless borrowing.

  • "Zombie firms are smaller, less productive, more leveraged and invest less in physical and intangible capital," the Bank for International Settlements concluded in a report last month.
  • "Their performance deteriorates several years before zombification and remains significantly poorer than that of non-zombie firms in subsequent years."

The bottom line: More zombies will lead to a slower, less efficient and less productive global economy.

Background: The number of zombies globally increased in 2019 for the third straight year and was on pace to reach one in five S&P 500 companies in the U.S. this year before the pandemic.

  • The BIS report also noted that among publicly traded small and midsized companies, "the share of assets, capital and debt sunk in zombie firms is as high as 30%-40%."

By the numbers: Much has been made of the fact that the U.S. national debt now exceeds the country's GDP, but U.S. companies have increased their debt load to 90% of the country's GDP, up from 75% in the fourth quarter of 2019, economists at the Institute of International Finance note in a recent report.

  • In the first half of the year, non-financial corporates piled up some $1.4 trillion of new debt, bringing the total debt load to a record high of $17.6 trillion.
  • Outstanding bank loans to small and midsized companies rose to more than $400 billion and now is more than $6.5 trillion, or 34% of GDP.

Go deeper

Dion Rabouin, author of Markets
Dec 14, 2020 - Economy & Business

A growing debt crisis that predates the pandemic will complicate the world's recovery

Data: Institute of International Finance; Chart: Danielle Alberti/Axios

A major issue that will complicate any potential recovery is the extreme level of debt corporations and governments around the world have built up, much of it predating the pandemic.

By the numbers: To dig themselves out of the hole COVID-19 created, governments and corporations have added significantly to their already heavy debt loads.

Dion Rabouin, author of Markets
May 6, 2020 - Economy & Business

The Fed now has the world's largest balance sheet

Reproduced from BofA Global Research; Note: Banks included are US Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Bank of China and Reserve Bank of Australia; Chart: Axios Visuals

By the end of this year, analysts at Bank of America Global Research estimate the Fed's balance sheet will have risen to nearly $10 trillion and the world's six largest central banks will have taken their holdings from around $15 trillion to $25 trillion worth of assets.

The big picture: The Fed now has the largest balance sheet of all central banks, having surpassed the European Central Bank and Bank of Japan.

Dion Rabouin, author of Markets
Dec 14, 2020 - Economy & Business

A growing corporate solvency crisis

Illustration: Eniola Odetunde/Axios

Companies around the world are increasingly at risk of failure, and the size of the problem is growing.

Driving the news: That's the message being delivered by two of the world's most respected monetary authorities — former European Central Bank president Mario Draghi and former Reserve Bank of India governor Raghuram Rajan — and a flurry of other top economists.