More countries could default on debt, economist says

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A growing number of countries could default on their debt over the next 12 to 18 months as governments globally ramp up spending to limit economic damage from the coronavirus pandemic, an economist said Wednesday.

“I think we’ll see some problems there, maybe we could see a eurozone crisis come back with countries like Greece or Italy …likely to be at the center of this,” Simon Baptist, global chief economist at consultancy The Economist Intelligence Unit, told CNBC. “Capital connection.”

“In the emerging world, I will choose countries like South Africa and Brazil as likely to suffer another crisis as a result of this,” he added. ” And of course, Argentina has actually fell back into sovereign default already.”

the coronaviruswhich has infected more than 1.9 million people worldwide, has prompted governments to take unprecedented measures to lock down entire countries or cities, halting much global economic activity.

the International Monetary Fund tuesday has revised its economic forecasts downwardssaying he now expects the global economy to contract by 3% this year – down from his previous growth projection of 3.3%.

Many governments have announced major stimulus measures to support their respective economies, with some taking on more debt to fund this spending. the WE increased its issues of Treasury securities, while the Germany say it plans to increase borrowing up to 150 billion euros ($164.4 billion).

But Baptist said not all governments could get the funding they seek. In particular, he said those in emerging economies would face “a big challenge” convincing international investors to lend them more money at a time when investors are looking for safer places to park their funds.

“A lot of emerging markets depend on international investors, international financial flows to get the financing needed for a budget deficit, they find it harder to borrow in local currency – although there are some exceptions,” the economist said. .

“At the moment, with this big shift towards risk aversion in international markets, even though there may be governments in the emerging world that would like to spend more, they won’t be able to get financing.”

WATCH: Is a global debt crisis looming?

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