03:29 GMT03 April 2020
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    The global pandemic has already wreaked havoc on the world economy, shuttering businesses, factories, offices and educational institutions worldwide, and bringing global trade and travel to a standstill.

    US-based financial and analytics company S&P Global expects COVID-19 to spark a global recession in 2020, and warns that it expects to see a spike in corporate defaults.

    "The sudden economic stop caused by COVID-19 containment measures will lead to a global recession this year," the company said in a report published Tuesday.

    According to S&P Global, a slump in cash flow, combined with tighter financing, and collapsing oil prices will hurt corporate creditworthiness rankings.

    "These factors will likely result in a surge of defaults, with a default rate on nonfinancial corporates in the US that may rise about 10 percent and into the high single digits in Europe over the next 12 months," the report said.

    Earlier, in a market intelligence report published on S&P Global's website on Monday, the company predicted that the negative economic consequences of the coronavirus pandemic will make themselves felt in the US in the second and third quarters (i.e. between March and September) of 2020, with the US economy expected to recover in 2021.

    Speaking to S&P Global, Swiss Re chief economist for the Americas Thomas Holzheu said a technical recession or GDP decline is already a reality in Eurozone members Italy and France, with China and the US currently at "a very high risk of recession."

    "For Europe and the Americas, we would see that negative impact hitting here in the second quarter through the third quarter and then we would get a recovery from that going forward into 2021," Holzheu said.

    Measures to battle COVID-19 have already led to a downturn in global economic activity in recent months, with China, workshop of the world, temporarily halting industries and exports, leading to shortages of components further on down in global supply chains. The US response to coronavirus has included an $800 billion package of fiscal measures to shore up cash flow and liquidity and prevent a total economic collapse, with the Federal Reserve cutting interest rates to near zero on Sunday, promising to buy up government bonds and turning on the money printing presses.

    In the UK, manufacturers have asked London for support to help limit the economic damage caused by the outbreak following the release of a report saying exports have fallen to a three year low.

    "The UK economy is going to be affected adversely, as has been the case for most economies around the world. The problem is that coronavirus is having a drastic impact and it is having an impact on both demand and supply side of the economy... The difficulty is that... in a sense, people are reluctant to go out and therefore there is a demand shock as well", says Professor of International Finance at Cranfield School of Management at Cranfield University Sunil S. Poshakwale.

    In France, auto giants PSA Groupe and Renault announced a total production halt in their factories on Monday, with President Emmanuel Macron saying Paris was now "at war" with the virus. Russia's cabinet and Central Bank have introduced a package of measures intended to support the economy. China, meanwhile, has introduced measures intended to allow for a rebound in economic growth in the second quarter after publishing fresh data on gruelling contractions in the industrial and retail sectors and rising unemployment on Monday.

    "So what needs to be done? I think in terms of what you could expect is that every other major economy in Europe would go through what Italy is going through, for example. And if that happens, I don't think the governments individually or central banks individually will be able to address the recession that will follow. I think what will be required for the recession is, as I said, coordinated global effort and institutions like the International Monetary Fund, World Bank to come together and provide the governments with much needed financial help in order to assist them through this very difficult period that will follow", Poshakwale added.

    Since originating in Wuhan, China in late 2019, COVID-19 has spread to some 150 countries and territories, infecting more than 182,000 people and claiming over 7,100 lives. The World Health Organization classified the outbreak as a pandemic last week.

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