Banks are tightening their lending restrictions as plunging economic growth increases the risk companies will be unable to repay loans and bonds.

The global default rate on speculative-grade debt would peak at 16.4 percent in November, worse than in the Great Depression, Moody’s Investors Service forecast on February 10. Defaults are rising even as central banks slash borrowing costs and governments boost spending in a bid to protect jobs.

Asian companies risk being crowded out of debt markets this year as governments boost bond sales to fund their stimulus measures, the Manila-based ADB said in a report earlier this week.

China, India, Indonesia, Malaysia and Singapore have all said they intend to raise spending on infrastructure to revive economic growth.

“The corporate sector might find some difficulty in refinancing debt,” Nag said Friday.

For governments, “it is very important to know whether infrastructure projects are bridges to somewhere or bridges to nowhere,” he said. “So long as the investments are productive that can be very positive. There are good projects and prospects for Asia.”

Source: Bloomberg