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How coronavirus will affect the world economy

2020-04-12 20:10:24

 The coronavirus is absolutely certain if it affects the world economy and we will soon see the consequences more strongly.

 Although it sounds a little strange and perhaps some consider that one thing has nothing to do with the other, it is clear that the expansion of the coronavirus is causing severe damage to the world economy, because sooner or later this exploded and here the consequences will be for all countries, especially considering that the major economies worldwide have large debts.

Why should companies continue to cancel their debts in the midst of the coronavirus pandemic?

 Even when the production chains are paralyzed, companies still must pay the debts they have, as well as not working is necessary to pay taxes, the cancellation of workers and the maturity of debts, which implies a global debt scenario.

 Well, it has been precisely the expansion of the coronavirus that has made some companies choose to make financial loans or simply issue new debt, which implies more problems in the world economy, because at this point all sectors are affected and this includes even tourism as there are restrictions to leave.

 It is clear that the outbreak of coronavirus has made the world economy is stopped, and here we do not see if they are large or small economies, affects everyone equally and increasingly seems to be a little more severe, being more damaged those companies that may be above what could be the value of GDP based on countries such as Japan, Germany, the United States to name a few.

Can high-risk coronavirus debt explode?

 The spread of the virus has been precisely the trigger of great impact on the world economy, because it has allowed to exploit the debts accumulated by companies and countries, generating a huge crisis, because the Federal Reserve has made clear that some risk loans made to companies 'leveraged loans' have increased considerably to the point of reaching the figure of 970 billion euros, which implies that it could really be getting out of control because the world economy is paralyzed.

 It is highly visible that some bonds issued by some companies may be rated high, leading us to junk bonds and thus to high risk. Obviously it is no secret that most countries in the world have large debts in relation to the financing of public accounts, this being an inconvenience that could be a shock to the markets especially because of the complexity with which the coronavirus has been presented and the impact it has achieved in the global economy.

 What can be said about junk bonds?

 The economic growth for some countries is simply quite low, thus allowing a rather gray scenario especially since the coronavirus has started, as these figures are clearly reflected by the largest entities worldwide among them can be highlighted the securities issued by the BDE, IMF, OECD and the Federal Reserve, precisely the latter has been categorical in stating that it had lowered 0.5 percent interest rates only last week.

 It is good to take into account that the coronavirus has opened the doors to a quite serious problem, since it has made the world economy stagger, especially taking into account that certain companies use to issue high risk debt bonds, which force to get high growth because it is necessary to face the payments for the generated debt, and this in itself implies the reduction of some perspectives, but that in one way or another they will have to fit due to the possibility of keeping a company alive even when the coronavirus is dragging the world economy.

 The coronavirus has managed to make a considerable fall lately and it is precisely the companies who are taking a toll on all markets to be paralyzed, as the global economy is undoubtedly in bankruptcy and only depend on the prompt solutions of the countries for what this may revive in the medium term.

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