Impact of COVID-19 on the Global Economy

Impact of COVID-19 on

the Global Economy

Dr Arun Singh

Global Chief Economist

September 02, 2020

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USA Europe India Japan China

Source: Yahoo! Finance, D&B Analysis

The rally in the stock market is driven primarily by the rally in a few large index

constituents

STOCK MARKET

Broad Market Index

(Jan 02, 2020 = 100)

3

Source: OECD, MOSPI, D&B Analysis

The real economy is in dire straits. Stay-at-home orders around the world have

impacted economic activity significantly in the previous quarter

REAL ECONOMY

Real GDP Growth – Q2 2020 (y-o-y)

-23.9%

-21.7%

-19.0%

-14.2% -13.5%

-10.0%-9.1%

3.2%

India UK France European

Union

Canada Japan USA China

4

Source: IHS Markit, Haver Analytics, D&B Analysis

Business Optimism is gradually recovering

BUSINESS OPTIMISM

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Source: Deutsche Bundesbank, Bureau of Labor Statistics, Haver Analytics, D&B Analysis

Unemployment increased around the globe but there are severe country-level

differences

UNEMPLOYMENT

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Source: Federal Employment Agency, Office for National Statistics, Haver Analytics, D&B Analysis

In some countries, unemployment is masked by costly Government schemes

UNEMPLOYMENT

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Source: Dun & Bradstreet

DUN & BRADSTREET COUNTRY RISK RATINGS MODEL

S H O R T - T E R M

E C O N O M I C R I S K

L O N G - T E R M

E C O N O M I C

P O T E N T I A L

M A R K E T

P O T E N T I A LF X R I S K

1 2 3 4

T R A N S F E R R I S KB U S I N E S S

R E G U L A T O R Y

E N V I R O N M E N T

B U S I N E S S

C O N T I N U I T Y

R I S K

5 6 7

P O L I T I C A L /

I N S E C U R I T Y R I S K

E X P R O P R I A T I O N /

N A T I O N A L I S A T I O N

R I S K

8 9

D&B

Countr y

R i sk

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DUN & BRADSTREET COUNTRY RISK RATINGS

Upgrades outnumbered downgrades over the last month – 1st time in many months

0

10

20

30

40

50

60

Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20

Downgrades Upgrades

No. of country risk ratings upgraded and downgraded

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DUN & BRADSTREET COUNTRY RISK RATINGS

Note: This map is for illustrative purposes and does not imply the expression of any opinion on the part of the D&B, concerning the legal status of any country or territory or concerning the delimitation of

frontiers or boundaries.

Nevertheless, the level of risk still remains high for many countries

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The no. of companies paying on time is expected to decrease in the coming months

PAYMENT DELAYS

Share of prompt payments (% of all accounts)

77%

69%

56%

41%

15%

75%

64%

45%

18%

10%

Germany Australia Brazil Mexico India

Mar 2020 Jun 2020

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Dun & Bradstreet’s latest GBI score remains at a record-high, indicating that the

outlook for cross-border businesses is at its worst level since the index was

introduced in Q3 2014


Global Business Impact (GBI) score

TEN KEY GLOBAL RISKS FOR BUSINESSES

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Impact on

Sovereign

creditworthiness

Protective trade

policies

Re-establishment

of lockdowns

Deterioration in

US-China

relations

Deterioration in

global equity

valuations


The impacts of the coronavirus pandemic are spread across different types of risks:

markets, economic growth and politics. The three non-Covid-19 risks are all political

in nature

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Increase in

unemployment

A new COVID-19

wave in Europe

Elevated CMBS

delinquency rates

Increase in copper

prices in H2

Political instability

in Lebanon


The impacts of the coronavirus pandemic are spread across different types of risks:

markets, economic growth and politics. The three non-Covid-19 risks are all political

in nature

14

Source: Center for Infectious Disease Research and Policy, WEF

Peaks and Valleys –The Bad Fall Peak –The WorstSlow Burn –The Good

Smaller waves of outbreak but with

lower no. of infections that persist

over a one- to two-year period and

gradually diminishing sometime in

2021

The first wave of COVID-19

infections is the only wave

followed by a “slow burn” of

ongoing transmission but without a

clear wave pattern

The 1st wave is followed by a larger

wave in the fall or winter of 2020,

and one or more smaller

subsequent waves in 2021. Similar

to what happened during the 1918

Spanish Flu and 1958 H2N2

Pandemic

The Center for Infectious Disease Research and Policy lists three possible scenarios

of how the COVID-19 may progress. However, there is no crystal ball to tell us what

the ‘end game’ will be

WHAT’S NEXT?

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Growth recovers within a

few quarters but leads to

some permanent loss of

output

Growth takes several

quarters to recover

leading to heavy

permanent loss of output

Growth recovers very

quickly but plunges again

leading to some

permanent loss of output

Growth recovers quickly

with no/small permanent

loss of output

U-Shaped V-Shaped L-Shaped W-Shaped

Pandemic and containment

peaks in the 3rd quarter,

and recedes quickly

Deterioration in public health

leading to prolonged

lockdown

Pandemic and containment

peaks in the 3rd quarter,

and recedes in the 2nd half

of this year

Easing of lockdown initially

boosts activity but growth

plunges due to 2nd wave ofCOVID-19 or ineffective policies

to prevent bankruptcies and

extended job losses

THE RECOVERY SCENARIOS

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While most countries are expected to contract this year, a sharp recover can be

expected in 2021

GROWTH FORECASTS

Real GDP Growth Forecasts

-9.8%-8.7%

-7.0%

-5.8% -5.7% -5.6% -5.3%-4.5% -4.5%

0.8%

6.3% 5.9%

1.8%

3.2%2.5%

1.3%

4.1%

6.7%

1.8%

5.6%

UK France South Africa US Brazil Japan Germany India Russia China

2020f 2021f

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SUMMARY


–Dun & Bradstreet expects a quick, V-shaped economic rebound in H2 2020

–This will be followed by a slower recovery in 2021

– In most countries, it will take until 2022 until pre-crisis GDP levels are reached

again

–Payment delays will increase over the next quarters

–The risk of business failures will also rise

–Monitoring counterparty risk will be crucial to weather the pandemic

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Thank You!

謝謝Dankjewel

merci

ありがとうधन्यवाद

Documents

Impact of COVID-19 on the Global Economy