Ratings agency Moody's has cut the growth forecasts for G-20 countries for the first half of 2020, given the impact of the coronavirus on economic activity.
Moody's issued an update on its forecasts for the global macro outlook and the ratings agency anticipates that the coronavirus will "hurt" economic growth in many countries, particularly slowing business and consumer activity.
It expects the group of G-20 economies to grow 2.1% during 2020. This is 0.3 percentage points lower than the previous forecast issued just weeks ago in mid-February, according to the report authored by vice president Madhavi Bokil, a senior credit officer.
Moody's is the only ratings agency that has South Africa ranked at investment grade at Baa3. It lowered South Africa's growth forecast for 2020 from 0.7% to 0.4%. China's growth forecast has been lowered from 5.2% to 4.8% and the US forecast has been lowered from 1.7% to 1.5%.
"The evolution of the virus remains highly uncertain and the full extent of the economic costs will be unclear for some time. Fear of contagion will significantly affect consumer behavior. The economic impact will magnify the longer it takes for households and businesses to resume normal activity," Bokil said.
Moody's expects economic activity to pick up again in the second half of the year, assuming that warmer weather in the Northern Hemisphere as summer arrives will weaken the spread of the virus and that global efforts to arrest the spread of the virus will be successful.
Mr. Bokil said that the spread of the virus was "severely" impacting trade and supply chains, "depressing" consumption and demand in affected countries. "There is not enough economic data yet to fully gauge the impact of the outbreak on China’s economy and the rest of the world so far," Bokil said.
Moody's said that policy announcements by fiscal authorities and central banks suggested that responses to the outbreak will be strong. The International Monetary Fund this week pledged $50bn to help countries fight the virus, BBC previously reported.
Global markets continued on a downward trend this week, on coronavirus fears. The JSE's All-Share and Top-40 indices both closed nearly 2% lower on Friday. The financials index lost as much as 3.11% on Friday, compared to resources which lost 2.04% and industrials which lost 1.3%.