Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240185 
Year of Publication: 
2021
Series/Report no.: 
BoF Economics Review No. 3/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
While corporate credit losses have been low since the start of the Covid-19 pandemic, their future evolution is quite uncertain. Using a forecasting model with a solid track record, we find that the baseline scenario ("expected losses") is benign up to 2024. This is due to policy support measures that have kept debt service costs low. However, high indebtedness, built up when the pandemic impaired real activity, suggests increased tail risks: plausible deviations from the baseline scenario ("unexpected losses") feature ballooning corporate insolvencies. Taken at face value, the low expected loss forecasts are consistent with low bank provisions, whereas the high unexpected loss forecasts call for substantial capital.
Subjects: 
COVID-19
JEL: 
E44
E47
E65
G17
G21
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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