SINGAPORE: The COVID-19 pandemic will continue to put a heavy strain on global credit conditions in 2021 despite positive news on a vaccine, S&P Global Ratings said on Friday in its ‘Global Credit Outlook 2021: Back On Track?’
“Even if a vaccine becomes widely available by mid-year which we assume in our baseline, the containment of pandemic will be very uneven worldwide,” said Alexandra Dimitrijevic, Global Head of Research at S&P Global Ratings.
“Until then, the main risk for the first half of 2021 is that further waves of COVID-19 cases requiring renewed containment measures may harm a fragile economic recovery and lead to further credit deterioration, particularly in sectors most exposed to social distancing and travel restrictions.”
Read More
- US: New York Capitol hit by cyberattack, budget deal delayed
- Whistleblower alleges UN cover-up of special favours for China, ahead of UK’s foreign affairs committee inquiry
- Singapore announces Lawrence Wong to take over as Prime Minister on May 15
- At least 33 killed, 27 injured in flash floods in Afghanistan
- GCC calls for regional stability amidst Middle East tensions
With economic momentum fading as COVID cases surge again, S&P forecast a weaker start to 2021 although the 2022-2023 GDP forecast is broadly unchanged.
“We expect full-year global GDP growth at 5 per cent, down 30 basis points from its previous forecasts. For China — first into the crisis and first out — we see GDP expanding by 7 per cent next year as acute downside risks ease and some upside emerges.”
The United States and Europe are mired in a second wave of COVID-19 but extensive vaccine purchases lined up by their governments support prospects of a turnaround in the second quarter.
“We forecast 4.2 per cent GDP growth in the United States and 4.8 per cent for the Eurozone in 2021. For emerging markets, financial pressures may hamper the pace of recovery,” said S&P.
After peaking at 265 per cent of global GDP at the end of 2020, global leverage is likely to ease only slightly in 2021, and mostly as a result of a rebound in global GDP.
With vaccine availability and a rebound in the global economy, the focus in the second half of 2021 will likely turn to the gradual unwinding of extraordinary fiscal support, revealing the extent of credit losses for banks.
S&P said governments, meanwhile, face the difficult task of balancing the near-term risks of premature austerity with a medium-term need to put debt on a declining path. (ANI)
Liked this story? We’ll send you more. Subscribe to TAS newsletter and get stories delivered to your inbox. Click to get started.
