In focus

Which countries' finances will suffer the worst long-term scarring from Covid-19?

Having been badly hit by the Covid-19 pandemic, most governments have been forced to restrict domestic life, and with that, economic activity.

However, many have chosen to offer support to households and businesses, but at what cost?

This note follows on from “Will Covid leave scars on the world economy?” by Keith Wade and examines the long-term scarring for the global economy, specifically, the impact on public finances.

The paper - available as a PDF below - primarily uses data from the IMF Fiscal Monitor Report including the IMF’s forecasts, to draw out which countries are likely to suffer the biggest impact over the long-term.

You can also watch Azad Zangana discuss the paper by clicking play on the video in the top right hand corner of this article or below.

We consider recent and likely future borrowing, the impact on debt projections, and likely change in the debt servicing costs.

We also consider other long-term factors that will impact public finances, and finally, the paper presents analysis on which countries are expected to be ready for the next economic cycle, and which will be lagging behind, running the danger of not being able to respond to the next downturn. 

You can also watch Azad Zangana discuss the paper by clicking play on the video in the top right hand corner of this article.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.