Our new report “Q4 global forecast 2020” argues that advanced countries will enter into a period of low growth, low inflation and high debt after the pandemic.

Key findings outlined in the report:

• The EIU predicts that austerity, tax increases or sovereign defaults will not be credible options for Governments. Instead, advanced economies might choose to do precisely nothing to tackle their debt burden.

• Under this scenario, developed economies will hope to keep nominal growth higher than interest rates, which means that debt will disappear over time.

• This situation will create opportunities to finance investment and research in an attempt to fuel the post-pandemic recovery.

• However, this comes with risks, including a rise in inflation that would prompt the debt pile-ups to spiral out of control and the development of “zombie firms”.

• Growth will be muted as companies and governments repay debt instead of investing.

• Advanced economies are turning Japanese, in a low growth, low inflation and high debt environment.

“Until the start of the coronavirus outbreak, Japan was considered an economic oddity. However, the features of the Japanese economy—slow growth, low inflation and high debt—will become common across advanced economies. The pandemic may not last once a vaccine is found. However, the post-coronavirus zombification of the global economy will be long-lasting.”

AGATHE DEMARAIS, GLOBAL FORECASTING DIRECTOR

Download the full report: Q4 global forecast 2020: A new era of slow growth, low inflation and high debt