Abstract:Hit by the COVID-19 pandemic，the world has witnessed large debt expansion and historically high leverage ratios. Compared to the 2008 global financial crisis，this episode of debt accumulation did not only catch the world by surprise but also came in overwhelmingly large scale. From the perspective of debt accumulation scale during 2019-2020，the public sector has raised more debt than the private sector，and the developed economies more than developing economies. While countercyclical policies are the main driver for public debt accumulation，differences of monetary and fiscal stimulus between developed and developing economies have resulted in much larger debt growth rate of the former than the latter. Three risks are of key concern in the post pandemic era. The first risk to watch out for is the sovereign debt distress in certain emerging and developing economies. Currently，nearly 50% low-income countries have already been in debt distress. The number of distressed countries may increase as a result of the uneven distribution of vaccine，unbalanced recovery and the exit of monetary expansion of the United States. The second risk is the increase of firm bankruptcy rate as the governments gradually exit countercyclical policies. All economies face the challenge of choosing the appropriate timing of unwinding pandemic related policy stimulus. The third risk lies in the financial sector that links with bankrupted agents. Developed economies should be concern of the vulnerabilities in their non-bank financial sector，while developing economies face high risk of capital outflow and currency depreciation as the world continues to follow the unbalanced recovery trajectory.
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