The private sector costs of COVID-19

The immediate costs of the COVID crisis will be shouldered more by governments than the private sector. However, as fiscal support recedes in the coming years, a greater share of the costs will be borne by households and firms, and ultimately by their creditors. Our base case is that loan losses will not be big enough to destabilise banking systems, but some economies, particularly in the emerging world, are more vulnerable than others. And even in countries where banking systems are on a surer footing, losses are likely to be big enough to act as a brake on lending, as banks work to maintain or restore capital buffers.