The second quarter (Q2) of 2020 will go down in history as the worst quarter for the global economy since at least World War II, Moody’s Investors Service said.

Moody’s continues to expect a gradual recovery beginning in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health.

“A rebound in demand will determine the ability of businesses and labour markets to recover from the shock,” the rating agency said today.

Moody’s said the effects of lockdowns on Q2 activity would be larger than previously thought.

“Incoming data show the extent of coronavirus-related disruption in Q1 and Q2.”

As a result, the firm revised down its 2020 growth forecasts for Germany (Aaa stable), France (Aa2 stable), Italy (Baa3 stable), the UK (Aa2 negative), Canada (Aaa stable), Brazil (Ba2 stable), India (Baa3 negative), Indonesia (Baa2 stable), Saudi Arabia (A1 negative) and Argentina (Ca negative).

It expects G-20 economies to contract by 4.6 per cent in 2020 as a whole, followed by 5.2 per cent growth in 2021.

“We expect G-20 advanced economies collectively to contract 6.4 per cent in 2020 before growing at 4.8 per cent in 2021.

“G-20 emerging markets will collectively contract 1.6 per cent in 2020, followed by 5.9 per cent growth in 2021. However, excluding China (A1 stable), the G-20 emerging markets will contract 4.7 per cent in 2020, followed by 4.3 per cent growth in 2021.”

Moody’s said differences in scale and composition of policy support across countries would result in uneven recoveries.

“Effectiveness of support will depend not only on the size of support packages but also the type of support implemented and the take-up of liquidity measures.

“Direct expenditure support and forbearance for businesses are meant to keep them from permanently closing.”

Other measures are in the form of equity injections and credit guarantees, which remove some planning uncertainty for businesses.

Financial markets, the firm said, had mostly recovered, but risks of disruption were high.

“Financial risks will intensify in the event of an unchecked resurgence in infections which necessitates a renewal of widespread closures.

“In addition, inadequate or premature removal of policy support poses financial stability risks,” it added.