The past decade of ultra-low interest rates has spawned the rise of “zombie” companies. These debt-laden firms don’t make enough to even cover their interest payments. With the Federal Reserve holding interest rates at near-zero for almost a decade, companies prefer to remain open while running at a deficit.
The number of zombie companies in advanced economies last year stood at 536, or 13% of the total, according to Bank of America Merrill Lynch. In fact, the number of zombie companies isn’t far from the peak of 626 seen during the depths of the Great Recession, BofA said.
The phenomenon isn’t healthy because of how it saps the rest of the economy of resources. But it might not become a problem as long as interest rates remain low.
Read more at CNN.
{Matzav.com}
