DBRS Morningstar Releases Global Macroeconomic Scenarios

DBRS Morningstar released a commentary on global macroeconomic scenarios and their implications for credit ratings.

Global macroeconomic forecasts have shifted dramatically amidst the rapid spread of the Coronavirus Disease (COVID-19) and associated responses from governments, corporations and households. The IMF forecast for global growth in 2020, updated earlier this week, deteriorated from (positive) 3.3% in January to -3.0% in April. On a quarter-over-quarter basis, the second quarter of 2020 is widely expected to be the worst on record for most major economy sovereigns, as the impact of widespread business and school closures, idled workforces, and social distancing ripples across the globe.

“The coronavirus pandemic and the associated response has generated tremendous uncertainty for economic forecasting and for credit risk analysis,” notes Thomas Torgerson, Co-Head of Sovereign Ratings for DBRS Morningstar. “In the context of this highly uncertain environment and for the sake of transparency, this commentary provides a simplified set of macroeconomic scenarios for select economies.”

The moderate and the adverse scenarios presented in the commentary are being used in the context of DBRS Morningstar’s rating analysis, with the moderate scenario serving as the primary anchor for current ratings, and the adverse scenario serving as a benchmark for sensitivity analysis.

Both scenarios are subject to revisions. This is particularly true of the moderate scenario, which, unless the situation stabilizes in coming weeks, may shift gradually lower. The adverse scenario, which is intended to reflect a significantly more bearish (albeit not necessarily worst case) scenario, is less likely to be revised, unless conditions over the next several months prove to be significantly better or worse than expected.

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on the impact of coronavirus on DBRS Morningstar ratings, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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