BIS sees worrisome increase in 'zombie companies'

Despite the extremely accommodative monetary policy of central banks, the number of 'zombie companies' in developed economies is rising. This is what the Bank for International Settlements (BIS) writes in its latest annual report. The main reason for this seems to be a lack of productivity growth in both advanced and emerging markets.

The BIS speaks of a zombie company if the company has been in existence for more than ten years and the interest costs are higher than the income. In 2007, this was still the case for 5% of all companies in the developed economies, but the crisis has doubled that percentage to about 10% in less than a decade.

The sharp increase in the number of non-viable companies is worrying, because central banks have done everything they can in recent years to make borrowing cheap. If one in ten companies is already unable to generate enough income at the historically low interest rates at the moment, what consequences will that have if interest rates return to the historical average of four to five percent?

BIS sees worrisome increase in 'zombie companies'(Source: ENCORE)