Based on the World Health Organization’s latest update, the number of cases of COVID-19 outbreak has now passed over 750,000 with a death toll rising to more than 36,000. As this spread surpasses global expectations, adverse economic effects are becoming clearer by the day. Not only due to social-distancing measures but along with plummeting consumer and business activity, the coronavirus issue has undoubtedly delivered a very sharp blow to the growth financial markets in general. As if the fast-rising human toll of the virus wasn’t enough, the world is facing an unprecented period of decline in economic activity and financial-assets, and the policy responses to both combat and offset these declines are equally as harmful to the global economy.
Even now, this is showing more apparent as global economic activity from the measures taken to stop (read: slow) the spreading of the virus pandemic will be massive in the future, similar to a domino effect. The most commonly expected result of this is that sudden economic stops caused by outbreak-containment measures will bring about a great credit pressure for borrowers worldwide to bear as the slumping cash flows and tight financing conditions weigh on everyone’s minds.
All of the world’s government authorities already acknowledge a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Estimates state the pandemic may peak out between the months of June and August but this is only an assumption based on assessments of the economic and credit implications of the virus. It’s not exaggeration to say the least that measures to contain the COVID-19 spread have pushed the global economy nearer to recession and not only that, but it could very well cause a surge of defaults among all corporate and non-corporate borrowers.
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