Economic recovery on the horizon: DBRS

Government action to mitigate the economic impact of efforts to contain the spread of Covid-19 will cushion the blow and set the stage for economic recovery later this year, says DBRS Inc.

In a new report, the rating agency said that the pandemic, and measures being adopted by public health officials to respond to it, will “impose a significant cost in terms of lost economic output” in the world’s major economies.

Governments and central banks are attempting to soften the economic blow with monetary and fiscal stimulus, along with assorted measures to keep credit flowing.

“Although the immediate impact of social distancing and widespread travel restrictions cannot be fully offset in the near term, DBRS Morningstar expects the cumulative effects of these measures to support a relatively more robust economic recovery beginning later in 2020,” DBRS said.

The report noted that certain sectors may take longer to recover, but that the “most severe slump in demand will most likely be limited to a few quarters.”

DBRS said that most advanced economy governments have space to introduce temporary stimulus measures without adversely impacting their sovereign ratings.

“Over time, fiscal policy can be subsequently tightened in most countries to restore flexibility to respond to future shocks,” DBRS said.

While economic damage will vary by geography and sector, DBRS said that the efforts of governments and central banks are seen as beneficial in blunting the economic impacts of the outbreak.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.