How Covid-19 Has Reshaped the Economy’s Balance Sheet

How Covid-19 Has Reshaped the Economy’s Balance Sheet

• Economy
• December 18, 2020

After the 2008 crisis, households and firms spent years rebuilding their finances in what economist Richard Koo dubbed a “balance-sheet recession.” Debt levels have jumped again this time round, but on closer reading, the books tell a more positive story.

Due to Covid-19, the borrowings of U.S. nonfinancial companies were 8.5% higher at the end of September than a year earlier, when they were already above the 2009 peak both in absolute levels and as a percentage of gross domestic product. Some publicly-backed programs won’t need to be paid back in full, but many investors are still worried.