Most economies will not return to pre-pandemic activity levels until 2022 and the global recovery will not be easy, Moody's Investors Service has said.
"We continue to expect a slow and bumpy global recovery. Despite the relative stability of our forecasts since last April, uncertainty around the macroeconomic outlook remains much higher than usual," it said in a sector in-depth report released on Wednesday (local time).
In the year since the World Health Organisation (WHO) declared Covid-19 a pandemic on March 11, 2020, the virus has disrupted the global economy and triggered a credit downturn accompanied by a spike in bond defaults.
"The credit challenges arising from Covid-19 have been substantial, but the credit downturn likely will be relatively short-lived. Risks remain more significant for the sectors most vulnerable to restrictions on their normal activities," said Moody's.
It said the pandemic's evolution will critically depend on vaccine rollout which should support a gradual easing of public health measures aimed at virus containment, allowing some return to normalcy.
The initial financial market reaction to Covid-19 was even sharper than the economic impact, but recovery has been much swifter. Policymakers will continue to support economic activity long after the pandemic has faded, in some cases for years, said Moody's.
Asset prices and issuers' market access have largely recovered from the pandemic shock but leverage metrics have shifted more permanently. "This is especially evident for sovereigns. Leverage metrics across corporate sectors have also jumped significantly."