While the initial focus is on the impact on people’s health, the economic after effects might prove even worse for many.
The economic aftereffects of the COVID-19 pandemic
The COVID-19 or corona pandemic is striking the world’s economy at full force. Next to the direct impact on the people’s health it is impossible to estimate the economic toll. A significant number of unknowns with respect to the course of the virus itself, and how long economic activity will remain disrupted afterwards are the greatest causes for this uncertainty.
Moody’s revised forecast of March 25th changed dramatically. In their ” The Coronavirus Will Cause Unprecedented Shock To The Global Economy” article, the real GDP growth forecast for G20 Economies shows an overall contraction of -0.5% for 2020. Whereas this year’s outlook prior to the outbreak was at 2.6% growth.
The outlook for emerging market countries is concerning, especially in LATAM (Mexico -3.7%, Argentina -3.9%). Without the luxury of ample government rescue packages, LATAM is likely to suffer from severe liquidity squeezes as traditional investors and banks will go into a “risk-off mode”. Uncommitted funding behind large Supply Chain Finance (SCF) and factoring programs might dry up, particularly affecting SME’s and mid-corps negatively in their ability to attract working capital funding.
In this context there will be an increased role to be played by the large multilaterals like IADB, EBRD and IFC, to step in. They will need to support (smaller) FI’s and their corporate clients in the continuation of their SCF programs, thereby securing working capital funding to SME and mid-corps supply chain partners.
A supply chain perspective is key in overcoming these economic disruptions. At Capital Chains, we understand the importance of working capital solutions throughout the supply chain. Especially, now in times of crisis, we believe SCF can be of significant importance to the survival of SME and mid-corps businesses. Both during the current decline in sales volumes as well as during the expected uptake of new orders post corona.
We work with both SCF-providers and SCF-adopters, including these multilaterals, FI’s and large corporates. We know how to accelerate your SCF journey, by putting our global SCF know-how and experience into practice. Let’s get to work!
It is our mission to accelerate the provision and adoption of sustainable SCF solutions, now more than ever!