A prolonged economic shutdown to contain the coronavirus or a return to lockdown in economies already opening up could result in a disproportionate hit to the economic and credit risks and could affect the survival of a large number of companies, according to S&P Global Ratings.
A drawn-out crisis might also reignite asset price swings and funding pressures, particularly for more vulnerable speculative-grade debt issuers already facing constrained access to finance, S&P said in a report released on Sunday. Changes in consumer habits affecting demand in certain industries, potential acceleration in “secular trends” and disruption to global supply chains could also shape the landscape of industry performance heading into next year.
“In addition to the uncertainty on the timing of recovery, until a vaccine is found, the level and path of economic growth in a post-coronavirus world is subject to lots of uncertainties,” S&P global head of research, Alexandra Dimitrijevic, said. “The potential damage to the fabric of the economy relating to employment, capital, and productivity will be a key determinant.”
The lockdowns have pushed the global economy into the deepest recession since the Great Depression, and is set to shrink 3 per cent in 2020, according to the International Monetary Fund. The bleak forecast from the Washington-based lender is more than a 6 percentage point revision, relative to its October 2019 estimates and updated January 2020 projections of a 3.3 per cent expansion in global gross domestic product.
The outlook, according to the IMF, is worse than the 2008 financial crisis and the lender does not expect recovery to take place before 2021.
S&P has a slightly more optimistic view about the global economy with a 2.3 per cent contraction forecast this year, a sharp downward revision from its 0.4 per cent economic expansion projection in March.
Governments and central banks across the globe have poured more than $8 trillion (Dh29.4tn) into the global economy to ensure financial stability, protect the corporate sector and support smaller businesses. However, the number of job losses is on the rise as the lockdowns remain in effect in large parts of Asia, Europe and North America. Some countries in Europe, the Middle East and Asia have now started easing restrictions, partially opening up their economies.
The pandemic has infected 2.89 million people globally and fatalities have topped 203,000 as of Sunday. More than 822,000 people have recovered, according to Johns Hopkins University, which is tracking the spread of the disease.
“Except for China, which suffered most in the first quarter, many major economies would be hit worst in April-June,” Ms Dimitrijevic said. “We anticipate the recovery through the second half of the year to be slow before gathering strength into 2021. However, the resulting 5.8 per cent global growth rate we see in 2021, driven by a rebound of demand, would be insufficient to recover lost output.”
Unlike the global financial crisis, the corporate sector is getting hit first this time, with certain industries choked by interruption of their activities. The sudden stop has forced corporates to increase debt levels to survive, rather than focus on deleveraging that would be more typical in a normal cyclical downturn.
The services sector, rather than manufacturing, has taken a harder hit by social-distancing measures, as reflected in purchasing managers indexes. The historic collapse in oil prices has also amplified the effect on some corporates. The banking sector, securitisations, and some sovereigns are also not immune to these negative developments.
“As we entered the crisis with a record level of credits rated ‘B’ and below, this will likely push the speculative-grade default rate above 10 per cent,” S&P noted.
Although economic forecasts continue to worsen, financing conditions have been gradually improving, particularly after the US Federal Reserve’s historic liquidity facilities, introduced on March 23, and expanded on April 9. The lifting of some social-distancing measures in China, alongside central bank support, appears to be improving lending trends there, pushing March corporate bond issuance to an all-time monthly high.
“Still, we see more-restrictive lending conditions amid the material contraction in economic activity from global containment measures,” S&P said. “Thus far, borrowers with stronger credit quality have been able to largely resume issuing debt, while funding costs remain prohibitively high for weaker borrowers in an environment of collapsing revenues.”
After a decade of tighter regulations around the world, banks have entered this crisis with much stronger balance sheets than they had at the onset of the global financial crisis. Capital and liquidity levels will provide material buffers for large banks in advanced economies to cushion the blow from this downturn.
However, once the dust settles and economies bounce back, the earnings recovery for banks is unlikely to be as sharp as the GDP rebound, according to S&P.
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UAE currency: the story behind the money in your pockets
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WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
UAE currency: the story behind the money in your pockets
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Generational responses to the pandemic
Devesh Mamtani from Century Financial believes the cash-hoarding tendency of each generation is influenced by what stage of the employment cycle they are in. He offers the following insights:
Baby boomers (those born before 1964): Owing to market uncertainty and the need to survive amid competition, many in this generation are looking for options to hoard more cash and increase their overall savings/investments towards risk-free assets.
Generation X (born between 1965 and 1980): Gen X is currently in its prime working years. With their personal and family finances taking a hit, Generation X is looking at multiple options, including taking out short-term loan facilities with competitive interest rates instead of dipping into their savings account.
Millennials (born between 1981 and 1996): This market situation is giving them a valuable lesson about investing early. Many millennials who had previously not saved or invested are looking to start doing so now.
Veere di Wedding
Dir: Shashanka Ghosh
Starring: Kareena Kapoo-Khan, Sonam Kapoor, Swara Bhaskar and Shikha Talsania
Verdict: 4 Stars
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The specs: 2018 Dodge Durango SRT
Price, base / as tested: Dh259,000
Engine: 6.4-litre V8
Power: 475hp @ 6,000rpm
Torque: 640Nm @ 4,300rpm
Transmission: Eight-speed automatic
Fuel consumption, combined: 7.7L / 100km
The Bio
Hometown: Bogota, Colombia
Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves in Abu Dhabi
The one book everyone should read: 100 Years of Solitude by Gabriel Garcia Marquez. It will make your mind fly
Favourite documentary: Chasing Coral by Jeff Orlowski. It's a good reality check about one of the most valued ecosystems for humanity
More from Neighbourhood Watch:
The specs
Engine: 6.2-litre V8
Transmission: ten-speed
Power: 420bhp
Torque: 624Nm
Price: Dh325,125
On sale: Now
RESULTS
Bantamweight
Victor Nunes (BRA) beat Siyovush Gulmamadov (TJK)
(Split decision)
Featherweight
Hussein Salim (IRQ) beat Shakhriyor Juraev (UZB)
(Round 1 submission, armbar)
Catchweight 80kg
Rashed Dawood (UAE) beat Otabek Kadirov (UZB)
(Round-1 submission, rear naked choke)
Lightweight
Ho Taek-oh (KOR) beat Ronald Girones (CUB)
(Round 3 submission, triangle choke)
Lightweight
Arthur Zaynukov (RUS) beat Damien Lapilus (FRA)
(Unanimous points)
Bantamweight
Vinicius de Oliveira (BRA) beat Furkatbek Yokubov (RUS)
(Round 1 TKO)
Featherweight
Movlid Khaybulaev (RUS) v Zaka Fatullazade (AZE)
(Round 1 rear naked choke)
Flyweight
Shannon Ross (TUR) beat Donovon Freelow (USA)
(Unanimous decision)
Lightweight
Dan Collins (GBR) beat Mohammad Yahya (UAE)
(Round 2 submission D’arce choke)
Catchweight 73kg
Martun Mezhulmyan (ARM) beat Islam Mamedov (RUS)
(Round 3 submission, kneebar)
Bantamweight world title
Xavier Alaoui (MAR) beat Jaures Dea (CAM)
(Unanimous points 48-46, 49-45, 49-45)
Flyweight world title
Manon Fiorot (FRA) v Gabriela Campo (ARG)
(Round 1 RSC)
Emirates Cricket Board Women’s T10
ECB Hawks v ECB Falcons
Monday, April 6, 7.30pm, Sharjah Cricket Stadium
The match will be broadcast live on the My Sports Eye Facebook page
Hawks
Coach: Chaitrali Kalgutkar
Squad: Chaya Mughal (captain), Archara Supriya, Chamani Senevirathne, Chathurika Anand, Geethika Jyothis, Indhuja Nandakumar, Kashish Loungani, Khushi Sharma, Khushi Tanwar, Rinitha Rajith, Siddhi Pagarani, Siya Gokhale, Subha Srinivasan, Suraksha Kotte, Theertha Satish
Falcons
Coach: Najeeb Amar
Squad: Kavisha Kumari (captain), Almaseera Jahangir, Annika Shivpuri, Archisha Mukherjee, Judit Cleetus, Ishani Senavirathne, Lavanya Keny, Mahika Gaur, Malavika Unnithan, Rishitha Rajith, Rithika Rajith, Samaira Dharnidharka, Shashini Kaluarachchi, Udeni Kuruppuarachchi, Vaishnave Mahesh
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
2021 World Triathlon Championship Series
May 15: Yokohama, Japan
June 5: Leeds, UK
June 24: Montreal, Canada
July 10: Hamburg, Germany
Aug 17-22: Edmonton, Canada (World Triathlon Championship Final)
Nov 5-6 : Abu Dhabi, UAE
Date TBC: Chengdu, China
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
Why seagrass matters
- Carbon sink: Seagrass sequesters carbon up to 35X faster than tropical rainforests
- Marine nursery: Crucial habitat for juvenile fish, crustations, and invertebrates
- Biodiversity: Support species like sea turtles, dugongs, and seabirds
- Coastal protection: Reduce erosion and improve water quality
The specs
Engine: 3.5-litre twin-turbo V6
Power: 380hp at 5,800rpm
Torque: 530Nm at 1,300-4,500rpm
Transmission: Eight-speed auto
Price: From Dh299,000 ($81,415)
On sale: Now
