In its latest special series ‘Credit Risks in Turbulent Times,’ Moody’s Investors Service said that the rapid spread of the coronavirus this month will result in a permanent hit to global economic activity this year.
“A sharp contraction of the global economy, at least in the second quarter, appears imminent.
Financial market volatility is at levels that last occurred during the global financial crisis.
And fear about the huge hit to business activity is contributing to extreme risk-off sentiment, resulting in the repricing of equities, commodities, bonds and currencies.
As business grinds to a halt, big and small firms are starting to lay off workers temporarily in an attempt to cut costs.
The long-term consequences will depend not only on the depth and duration of the hit to economic output but on whether it will cause lasting damage to balance sheets of households and businesses.
While the shock could disrupt many sectors, the burden will weigh disproportionately on the transportation sector, the energy industry, hospitality, healthcare and consumer services, especially hotels, restaurants and leisure. In the worst case, entire industries could be destroyed.”