Moody’s Investors Service stated that Covid-19 could permanently transform banking in a report released last week.
This week, the firm finds that the pandemic is expected to fundamentally change how companies, economies and societies function.
In a new report, the rating agency projects that long-term growth prospects may weaken for many major economies.
“The coronavirus shock may leave some permanent scars on the global economy, including a long-lasting slowdown in growth in many countries,” the report said.
“Even before the shock, we had expected growth to remain subdued because of aging populations in advanced economies and the slow pace of business investment in recent years. The pandemic has added a further layer of uncertainty for both businesses and households and will likely forestall growth in consumer demand because of a potential increase in long-term unemployment,” the report said.
Additionally, the increase in public and private debt to combat the crisis will likely reduce business investment, resulting in lower long-term growth.
As a result, interest rates will “stay lower for longer, and longer,” it said.
This will, in turn, “perpetuate trends that have been apparent since the financial crisis, including looser credit availability and higher levels of public and private debt,” it said.
Moody’s also sees further fragmentation in global trade.
“The trend toward a more splintered and protectionist global economy will likely gain speed, with competing economic blocs and new restrictions on trade, investment and technology transfers,” it said.
At the corporate level, the report said that shifting consumer habits during the pandemic may produce permanent changes, “such as reduced demand for office space, air travel, public transport, in-store shopping and on-site entertainment.”
These trends will generally play to the advantage of tech companies, accelerating tech disruption of certain sectors, it said.
The report also suggested that expectations for governments will evolve.
“The role of government in society will likely magnify, but rising inequality could result in a deterioration in social cohesion and reduced trust in institutions in some countries,” it said.
“More regulation is also likely, particularly in areas viewed as vital for national security and self-sufficiency,” it noted.
As mentioned in a May report, Moody’s sees the focus on environmental, social and governance (ESG) risks ramping up in a post-Covid world.
“The pandemic experience will intensify the focus of companies, investors and other stakeholders on ESG factors, with scrutiny extending beyond public health crises to other issues with potential for high impact, such as climate change,” it said.