It now expects the G-20 advanced economies as a group to contract by 5.8 per cent in 2020. Even with a gradual recovery, it expects 2021 real GDP in most advanced economies to be below pre-coronavirus levels.
"Excluding China, we forecast the G-20 emerging market countries to contract 3.5 per cent in 2020, down from our forecast of 3.2 per cent growth before the outbreak. We expect China's economy to grow by 1 per cent in 2020," it said in a research update.
Risks to Moody's forecasts are firm to the downside. There are significant downside risks to forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated.
"Even without longer-duration lockdowns, a self-perpetuating dynamic can take hold, resulting in large-scale destruction of businesses and entire sectors, as well as a structurally high unemployment rate, a permanent loss of human capital, and persistent malaise in consumption and investment." Moody's said oil prices will likely remain low. "We expect the Brent spot price to average 35 dollars per barrel and WTI spot to average 30 dollars per barrel for this year. Oil prices will likely move up in 2021 as demand recovers along with economic growth. For 2021, we forecast Brent to average 45 dollars per barrel and WTI to average 40 dollars per barrel." Varying approaches to social distancing and healthcare access will lead to different exit strategies and outcomes. The length of time and extent that countries lift restrictive measures and reopen their economies will determine the pace of recovery. Restrictions and healthcare accessibility for those who fall ill have varied widely.
Economic policy measures will continue to widen. "Our forecasts assume that policy measures across advanced economies will continue to grow and be fine-tuned. The fiscal policy response in many emerging market countries was initially more restrained. Stimulus measures are growing as the economic damage becomes clear, although some countries face financial constraints." Moody's said the crisis has long-term implications for the structure of the global economy. Global integration within the world economy will likely shift.
For example, the coronavirus shock has created supply chain disruptions and can also fundamentally change consumption patterns, which could lead to a large-scale reorganisation of economies over time.