On July 14th, the 2020 Credit Outlook on the theme of “China’s Credit Outlook under the Global Spread of the Epidemic” jointly organized by Moody’s Investor Services and China Chengxin International Credit Rating Co., Ltd. The seminar opened online. Moody’s pointed out in the macroeconomic and sovereign research that the global economy is slowly recovering, but the road to recovery is long and tortuous.
Moody’s predicts that the advanced economies in the G20 will shrink by 6.4% in 2020 and rebound to 4.8% in 2021; the emerging economies in the G20 will have an economy in 2020 It shrank by 1.6% and rebounded by 5.9% in 2021.
And the actual output of most countries in 2021 will be lower than the pre-outbreak level.
In terms of China’s growth, Moody’s pointed out that China’s economy will continue to pick up, and the epidemic’s impact on sovereign credit is limited.
Moody’s believes that despite the initial signs of recovery in various countries, the economic downside risks are still more prominent. First of all, there is a risk of an outbreak in the second half of this year. If the epidemic strikes again, it may lead to further blockades and make it more difficult for the government to fund and implement support measures and transfer payments. Second, if a longer period of time or repeated shutdowns increase the number of closed companies and the unemployment rate rises, asset quality will decline. Increased pressure on the profit margin of the financial industry will lead to increased economic and financial pressure. Third, permanent changes in consumption and business behavior will disrupt certain sectors and supply chains, leading to structural changes in the pace of economic activity. Fourth, if countries fail to work together to fight the epidemic, economic recovery will face greater risks and the economic consequences may be more serious.
Moody’s stated that the epidemic will change global credit trends. Developed economies face heavier debt burdens due to slower growth and weakened fiscal capacity. The Chinese economy has increased the leverage ratio of the Chinese public sector higher than other sectors. Compared with countries with similar ratings, China’s general government debt has remained at a moderate level.
Affected by the epidemic, countries realize the need to improve the safety of the supply chain and reduce their dependence on a single supplier. Moody’s said that the global trade landscape will become more decentralized, and the restructuring of the supply chain will show a trend of shortening and more diversification. Although more stable, it will also lead to reduced efficiency and increased inventories. This is beneficial to markets where the operating environment and human capital are relatively good and geopolitical risks are low; if the manufacturing origin shifts, although some markets will assume more commitments due to the shift in supply chains, the benefit is that it will not only allow a few emerging Market benefits will also benefit some developed markets.