Vaccines unlikely to be a silver bullet for the global economy: Moody’s – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/indicators/vaccines-unlikely-to-be-a-silver-bullet-for-the-global-economy-moodys/articleshow/81445698.cmsSynopsis

Gross Domestic Product growth will depend on how countries manage the virus through vaccination programmes and other measures, but the longer-term economic impact will depend on how many jobs are lost before activity can resume across different sectors, Moody’s said in a report on Wednesday.

Coronavirus

COVID-19 CASES

WorldIndiaCovid-19 vaccines are unlikely to be a silver bullet for the global economy as uncertainty over virus mutations prevail and slow progress of vaccination drives in certain regions could give rise to pockets of localised outbreaks, according to rating agency Moody’s.

Gross Domestic Product growth will depend on how countries manage the virus through vaccination programmes and other measures, but the longer-term economic impact will depend on how many jobs are lost before activity can resume across different sectors, Moody’s said in a report on Wednesday.

The global rating agency expected fewer rating actions in the current year compared to the last as pandemic credit risks ease on account of the commencement of a slow and uneven recovery period.

While the incidence and prevalence of the pandemic is likely to gradually decline over the year, new and more virulent mutations pose a key risk to normalisation efforts, the report said, adding that rather than eliminating the virus, countries would have to ‘learn to live with it’ at low case rates.

“A residual level of COVID-19 likely will persist over time, raising the prospect of global pockets of risk in regions where vaccination progress is slow, and of localised outbreaks,” it said.

According to Moody’s, labour markets will play a more crucial role than commodity prices as it expected the global consequences of commodity price movements to be small despite the volatility in oil prices.

Heterogeneity in the pace of recovery across different sectors and economies was consistent with the notion of a K-shaped recovery, the report said.

Sectors like food retail, communications and goods shipping fared relatively well over the past year while activity levels in the hospitality sector and air travel, in particular, remain very depressed, it said.

This created uncertainty over current growth projections, the agency said, as it would result in a slow and bumpy recovery.

Creditworthiness of issuers’ would critically depend on the management of their debt dynamics as Covid-19 fades as a public health threat, it said.

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