After the financial crisis, the proportion of zombie companies has increased as a proportion of non-financial companies in a number of OECD countries, including Sweden. [1] The rising share can to a large extent be linked to the low interest rates in many countries since the financial crisis of 2008-2009 in the wake of the expansionary monetary policy. The low interest rate environment has also become long-lasting with a slow increase in inflation that is still well below the inflation target of around 2 per cent. The trend in the low interest rate environment is that the number of zombie companies is increasing and surviving. These low-productivity companies would normally have competed if interest rates were higher.
The increased proportion of zombie companies is reducing the potential growth in the entire economy, partly as a result of these companies having a very low productivity and partly because they are pushing away opportunities for more productive companies to expand. There is thus an imminent risk that an increased survival of zombie companies counteracts the structural transformation and leads to stagnation.
The continued low interest rate policy and extensive public support programs in the wake of the corona crisis further increase the risk of stagnation. The sharp decline in the world economy in 2020 means that it will probably take until 2022 before production recovers what was lost in 2020. This also means that the increase in production that would probably have taken place without the corona crisis has been lost and that it will take even longer to reach the presumptive level that the economy could have reached without the crisis. Central banks continue to keep interest rates low and lending to companies is encouraged to survive the crisis. At the same time, the risk remains that unprofitable zombie companies will also survive.