In the year since the World Health Organisation (WHO) declared COVID-19 a pandemic on March 11, 2020, the virus has disrupted the global economy and triggered a credit downturn accompanied by a spike in bond defaults, said Moody’s.
In a global report on coronavirus, Moody’s said that the credit challenges arising from COVID-19 have been substantial, but the credit downturn likely will be relatively short-lived. Risks remain more significant for the sectors most vulnerable to restrictions on their normal activities.
It said that though the pandemic is slowing down, it doesn’t mean that it is completely going to disappear. “The pandemic’s evolution will critically depend on vaccine rollout, which should support a gradual easing of public health measures aimed at virus containment, allowing some ‘return to normalcy’”, the report added.
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Stating that most economies will not return to pre-pandemic activity levels until 2022. ‘’We continue to expect a slow and bumpy global recovery. Despite the relative stability of our forecasts since last April, uncertainty around the macroeconomic outlook remains much higher than usual”, said Moody’s
Policy actions will continue to support economic activity and financial markets after the pandemic has eased, it added.
Moody’s expects the incidence and prevalence of the pandemic to gradually decline over the course of this year, as vaccination numbers rise. As a result, governments would gradually be able to ease lockdown measures.
However, a residual level of COVID-19 likely will persist over time, raising the prospect of global pockets of risk in regions where vaccination progress is slow, and of localized outbreaks.
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Moody’s further said that it took several rating actions in response to the credit consequences of the pandemic and does not expect to conduct another wholesale review of credit ratings this year unless there is a significant shock to the global economy or to financial markets, or a shock resulting from a dramatic change in the trajectory of the virus.
Earlier this year, Moody’s had predicted that Pakistan’s economy would see a 1.5 percent increase in the current fiscal year. “Economic activity will remain below pre-outbreak levels, although the economy should return to modest 1.5pc growth in the fiscal year 2021,” it stated.