Economics
Fed Economists Warn of Debt Overhang Problem From Covid Crisis
- Worst affected companies may grow 10% more slowly in pandemic
- Smaller firms could struggle to ease debt load via bankruptcy
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The Covid-19 crisis could be worse than the Great Recession for companies that had high levels of indebtedness at the start of the outbreak, according to economists at the Federal Reserve Bank of New York.
Firms in industries most affected by the pandemic such as tourism, travel and hospitality could grow as much as 10% more slowly than in ordinary times if the current crisis plays out in a similar way to the economic decline of 2007 to 2009, Kristian Blickle and João Santos wrote in a blog post on Tuesday.