IMF: The Resilience of Private Balance Sheets in Europe during COVID-19

One of the positive surprises about last year’s recession is how little damage it inflicted on average household and corporate balance sheets in Europe.

In the past, deep recessions were followed by protracted weakness as they left households and businesses with significantly higher debt and lower income and capital. So far this has not been the case with the COVID-19 crisis, largely thanks to the extraordinary policy response by governments and central banks.

As the recovery takes hold, however, policy makers will need to maintain support for the hardest hit segments of the economy and remain alert for signs of economic damage yet to emerge. Not all private balance sheets were equally resilient.

In new IMF staff research, we observe the resilience of private sector balance sheets. For example, using a simple balance sheet vulnerability index, which combines measures of leverage (or indebtedness) and liquidity, we can see that despite the collapse in GDP in European Union countries and the United Kingdom in 2020, business and household balance sheets in Europe were little affected on average.

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Πηγή: blogs.imf.org