What comes to your mind when you think of 2020? For the majority, it was the year that the world stopped and everything, even the economy, went down. Jobs were cut, millions lost their salary and with that, a safe income for each month. Covid-19 made everyone struggle and the debt this has brought has skyrocketed like never before. By the end of 2020, the global debt total was $281 trillion, more than 355% of global GDP. Many countries started creating several financial aids to help their citizens survive this pandemic and the economic disaster it created. Only the U.S alone gave out $927 billion in economic aid. The question everyone has now is, what will happen in 2021? Is debt in 2021 on the rise?
The challenge every country has now is to create a great exit strategy to avoid these extreme amounts of debt and interest. But, how? With COVID vaccines now available to the majority of Americans and several other countries around the world, many people are starting to see that “light at the end of the tunnel”. Companies are slowly beginning to work again and many people have recovered their job or found another. This offers some hope for the nation’s fiscal situation and is expected to improve with normal business activity resuming as more Americans get vaccinated. Even so, those numbers are low and nothing in comparison to the damage that this pandemic has already made. The nonpartisan office forecast a difficult long-term recovery as the interest cost rises and expenses on health programs increase. Because of this, many governments with big-budget deficits have been given no choice but to keep on borrowing this 2021 and increase the already high debt by another $10 trillion more. The new stimulus package, for example, promises $1,400 to every eligible citizen, which sums up to $1.9 trillion. But this budget will be financed with borrowed money and is expected to increase the already existing deficit. The C.BO. has already stated that the federal budget deficit, which is the gap between what the U.S. spends and what it takes in taxes and other incomes, is expected to be 10.3% of GDP this year. This would make it the second-highest level since 1945.
Debt in 2021: Review
Even though a year seems like nothing when we look back at all the economic damage that was made in 2020, it seems impossible to recover. So, is debt in 2021 on the rise? The numbers tell us that debt this year is inevitable. Even so, with all that has happened, we can say that we are slowly but surely recovering and will continue to do so this 2021.