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The downside risks to global growth due to the pandemic remain sizeable as a sustained pullback in consumption and prolonged closures of businesses can feed recessionary dynamics, warned Moody’s Investors Service.
QuantCube alternative data indices point to a slide in global activity and a retrenchment in employment, the global credit rating agency said in a presentation titled ‘Coronavirus and the Economy’. The economic effect of the pandemic will be seen in demand shock (falling consumer demand from spread of the coronavirus), supply shock (production disruption from restricted movement) and financial market shock (volatility in financial markets), it predicted.
Channels of impact
The agency said the channels of impact of the pandemic will be a slowdown in travel/ tourism (flight and cruise restrictions to affected areas, cancellation of business and vacation travel, cancellation of large events) and a consumption slowdown (quarantine restrictions, school/factory/business closures, fear and aversion to public gatherings).
Further, Moody’s referred to supply chain disruptions (factory closures in affected regions resulting in delays and shortages down supply chains globally, uncertainty and low sentiment affect investment) and stress on healthcare systems (higher demand for healthcare services and products).
Additionally, the agency mentioned a fall in oil/commodity prices (lower demand keeps commodity prices low and volatile) and financial market volatility (declines in equity prices, a rise in risk aversion and spreads, a rise in delinquencies, lower interest rates).
According to Moody’s, the sectors that will be affected negatively are: airlines, cruise lines, hotels, travel/leisure; local services, wholesale/retail trade, transportation, education; technology, auto, telecom, shipping, pharma; healthcare system; commodity exporters; and financial institutions.
The sectors that will see positive impact include remote communications; online media, online retail; sectors that benefit from supply chain relocation; and vaccine developers.
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