Expected revenue loss for companies: $5 trillion!

Covid-19: Fitch Ratings expect recovery to be slow and halting

GN Bureau | June 10, 2020


#Covid-19   #Coronavirus   #economy   #corporate sector   #energy   #oil and gas  
(Illustration: Ashish Asthana)
(Illustration: Ashish Asthana)

 The corporate sector around the world is expected to suffer losses in revenue worth USD 5 trillion, according to a report prepared by Fitch Ratings. 

 
“The most stringent period of lockdown is over for many jurisdictions, signalling the start of a challenging period of reopening,” Fitch Ratings said in a release issued in London Tuesday. It has published a sector-by-sector analysis of its assumptions for the road to recovery, for more than 80 corporate sectors and sub-sectors globally.
 
“Our projected revenue-recovery curves for corporate sectors, using our baseline scenario, confirm a slow and halting recovery process for many sectors. Our recovery narratives suggest revenue destruction of more than USD5 trillion in 2020, compared to the USD26 trillion of revenue reported by our corporate portfolio in 2019, extending to more than USD8.5 trillion of revenue destruction by end-2021,” the release said. “This estimate only covers our corporate rated portfolio, which in turn represents USD14 trillion of the estimated USD74 trillion corporate debt globally.”
 
The oil and gas sector accounts for the most revenue destruction in dollar terms, representing 40% of the aggregate revenue fall, it said. While the oil price has recovered from historic lows, pricing is still well inside Fitch’s price-deck estimates and it expects economic sentiment to remain subdued after the initial post-lockdown euphoria dissipates.
 
It projects a decline in car sales of about 20% globally in 2020 (followed by a recovery of around 15% in 2021), making the automotive segment – a critical element of the global manufacturing base – the second-largest revenue victim after oil and gas, albeit by a large distance. Further downside revision is possible if demand for big-ticket items weakens further, the release added.
 
The most severe relative declines for any sector occur in the leisure and transport sectors, Fitch said, projecting for it revenue losses of 40%-60% in 2020. Although the underlying segments account for a relatively minor share (just 3%) of the aggregated global corporate revenue in the Fitch portfolio, they have a disproportionate contribution to employment in the wider economy. 
 
The report also identifies a range of sectors and sub-sectors that Fitch expects to prove resilient post-lockdown, including telecoms and individual segments within technology, healthcare and even retail.
 
“The range of region-specific variations we analyse in our report do not meaningfully change the shape of the global recovery curve, with all regions generally adhering to a global pattern of a slow recovery from a traumatic 1H20,” it said.
 
More detail on the regional distinctions and the full narrative for all 87 sector curves are included in the report ‘The Road Back: Post-Lockdown Assumptions for Global Corporates’, available at fitchratings.com.
 

Comments

 

Other News

Four trends that will shape healthcare post-Covid

The Covid-19 pandemic has disrupted economies and healthcare systems across the world. Even in the countries like the US that have the highest spend on healthcare and public health emergency preparedness, the impact of coronavirus pandemic on health and livelihoods of people has been tremendous. There are

India to play leading role in global revival: Modi

India would play a leading role in the global revival, prime minister Narendra Modi said on Thursday, as he addressed the inaugural session of India Global week via video-conference. He said that this is closely linked with two factors. “First is - Indian talent and second is India`s

BMC spells out numbers to counter Fadnavis’ claims

The BrihanMumbai municipal corporation (BMC) has countered Maharashtra leader of opposition Devendra Fadanvis’s suspicions of fewer Covid-19 tests, as it outlined various measures it has adopted since the first test conducted on February 3, and how it has gradually brought down the number of cases in

Mumbai opts for “most liberal Covid-19 testing” in the world

As part of the four T strategy of trace-test-track-treat, Mumbai – the most affected city in India – has decided to make Covid-19 tests accessible to all. The municipal corporation of Greater Mumbai (MCGM) has come out with guidelines allowing all laboratories to conduct RT-PCR (

Exit the Dragon, Enter the Tiger

In a major development on July 6, the Chinese army started moving back its tents, vehicles as well as troops from locations where disengagement was agreed upon in eastern Ladakh’s Galwan Valley. This is a significant milestone in regional geopolitics with India having been successful in isolating the

Hiranandani Group launches ambitious data centre project

With the Covid-19 pandemic pushing more online activity and the capacity usage of data centres going up, India’s largest data centre (DC) building and the biggest tier-IV data centre, Yotta NM1,the  second largest in the world, has been launched in Mumbai. The launch event on Tue



Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter