Corporate debt is quietly running up to levels not seen in more than a decade, and some economists are starting to sound the alarm that it could be the most underestimated risk lurking in the global economy in 2026. As inflation, interest rates and consumer spending grab headlines, a more structural problem is burgeoning beneath the surface — one that could reshape business investment, hiring and long-term growth.
In recent years, companies leaned heavily on cheap borrowing to expand operations, modernize supply chains and insulate themselves from economic shocks. But the cost of servicing that debt also soared as interest rates climbed. Companiesthat once borrowed virtually for free are now watching their financing cost absolutely double or triple, impinging on cash flow and eroding capacity to operate smoothly.
The most exposed companies are those that constructed growth on steroids in the near-zero interest rate epoch. Many start-ups and midsize companies borrowed aggressively without foreseeing today’s financing environment. They now must endure a painful phase of restructuring, when debt refinancing carries much the higher rates of interest — and they cut jobs, suspend expansion plans or sell off assets.
There are even bigger companies feeling the pinch. Some multinationals while waiting on Europe’s response to the crisis have quietly put some new projects on hold because their borrowing costs have skyrocketed more than they had expected. Industries like commercial real estate, retail, manufacturing and logistics are especially vulnerable, because many of the companies in these businesses rely on long-term credit cycles to survive.
A second layer of risk is sprinkled across variable-rate corporate loans. With central banks keeping rates too high to get after sticky inflation, companies like it which have only adjustable financing are finding their repayments systematically surge year by year. This is generating a wave of “silent distress” — companies that aren’t in trouble yet but are much weaker than they seem from their financial statements.
A further worry is that consumer demand in some markets is falling. Even healthy firms can slide into financial fragility when revenues soften and interest expenses climb. These pressures are already showing up in quarterly results, where a number of firms posted margin-compression even though sales volumes remained steady.
The risk may not be an imminent corporate clatter, but a gradually squeezing stress that curtails investment, dampens hiring and reduces productivity over the years. Economists caution that broadbased corporate deleveraging could act to slow global growth just as major economies are trying to climb out of high inflation and supply chain instability.
Yet there are grounds for cautious hope. A lot of companies amassed cash reserves in the robust years, and relatively more isolated sectors like technology, A.I., pharmaceuticals and energy are sizzling. But more broadly, the higher expense of corporate debt is a structural issue — one that policymakers and investors can ill afford to ignore.
If a buildup of debt and an expanded debt burden were to come while the cost of borrowing is high, it could usher in a new phase of global growth in which corporate caution replaces corporate ambition — and perhaps recast the business landscape for years.
