Economists see global recovery in 6-9 months
However, the signs from countries where lockdown restrictions are now being eased suggest that the economic downturn could be relatively short-lived if certain factors come into play sooner rather than later.
“Indeed, I believe that the global economy is likely to be headed for recovery from a coronavirus-triggered downturn within six months — but only if mass testing is rolled out now and governments guarantee to support demand,” said Green.
“If mass testing is carried out stringently and immediately, we could be looking at recovery signs within six months. If there’s a failure to do this, we could be looking at much longer downturn.”
Most major economies have been rolling out stupendous economic stimulus packages and quantitative easing measures to contain the economic impact.
In the Gulf, the UAE unveiled a Dh127 billion stimulus package while Saudi Arabia announced SR120 billion of support. The US allocated $2 trillion; Germany €750 billion; South Korea $9.8 billion; the Bank of England $379 billion in business loan guarantees, $23 billion in tax cuts and bond purchases of $228 billion; the European Central Bank $128 billion; France $49 billion; Brazil $30 billion; India $22.5 billion; and Canada $214 billion, as well as hundreds of billions dollars by China and Japan. The IMF pledged $1 trillion in loans, while the World
Bank and the International Finance Corporation has pitched in $14 billion to help nations facing the pandemic assault.
On Tuesday, the UN said six billion people living in developing economies hit by the pandemic will urgently need a $2.5 trillion rescue package to boost their resilience to further hardship.
IMF chief Kristalina Georgieva, who expects a recovery in 2021, said the length and depth of this global recession depend on two things: Containing the virus and having an effective, coordinated response to the crisis.
S&P Global Ratings said a prolonged outbreak will depress economic activity and stress health systems. Extended shock to investor sentiment could result in heightened refinancing risk, especially for low rated issuers.
“Global recession is heightening risk aversion, resulting in significant capital outflows from emerging markets, pressuring currencies and widening spreads. The sudden and substantial shock to global economy has impacted several sectors in EM economies, pressuring credit ratings.”
S&P noted the volatility in capital markets resulting from the pandemic and oil price shock could weaken the credit quality of some insurers in the GCC.
“Most insurers we rate in the GCC region benefit from robust capital buffers and should be able to absorb Covid-19-related claims and capital market volatility,” said S&P credit analyst Emir Mujkic. “However, the significant fall in equity markets, widening bond spreads, and ongoing decline in real estate prices will damage earnings and capital buffers of insurers with material exposure to these asset classes.”