Coronavirus: The Global Impact: April 7th, 2020

Coronavirus: The
Global Impact
April 7th, 2020
Copyright © 2020 by S&P Global.

All rights reserved.
Speakers
Moderator:
Gary Regenstreif Paul Gruenwald Chris Rogers Rachelle Kakouris Liam Eagle
Executive Editor, News Global Chief Economist Supply Chain Analyst Director Research VP, Voice of the
S&P Global Market S&P Global Ratings S&P Global Market LCD Research Enterprise & Voice of the
Intelligence Intelligence Panjiva Service Provider
451 Research
(now a part of S&P Global
Market Intelligence)
*Statements by persons who are not S&P Global Market Intelligence employees represent their own
views and opinions, and are not necessarily the views of S&P Global Market Intelligence.
Permission to reprint or distribute any content from this presentation
requires the prior written approval of S&P Global Market Intelligence. 2
The Economic Impact of
COVID-19
Paul Gruenwald
Global Chief Economist
S&P Global Ratings
April 7, 2020
Coronavirus: The Global Impact Webinar
Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global
Market Intelligence. Not for distribution to the public. Copyright © 2020 by S&P Global Market Intelligence. All rights reserved
Global Macro meets COVID-19: Unprecedented Times …
Some preliminary thoughts
• There is no analytical framework/history to map a global pandemic into macro variables

(macroeconomics was developed/grew out of work by Keynes in the 1930s/1940s).
• The speed and magnitude at which economic and financial variables are moving is
unprecedented – some examples later.
• Macro forecasts always have a confidence interval, but when compounded by (and driven by) a
health shock, these intervals are much wider.
• Macro/business/employment vs public health trade-offs can be complicated.
• It’s not too early to think about the shape and velocity of the recovery.
The Health Policy Response To COVID-19 Dynamics Is Key
Everyone (hopefully) now knows why plotting logarithms is important!
COVID-19 Cases in 2020

100000
10000
1000
100
10
1
1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 11-Mar 25-Mar
China Italy US
Source: Johns Hopkins University
Our Stab At Macro-Sectoral Credit-COVID Linkages
Consider the Following Unprecedented Moves In The Data
1. US jobless claims rose 3.3 million in the week of March 21, five times the old (1982) record. The
following week they doubled.
2. Chinese industrial production, profits and retail sales all fell by their largest amounts ever in
January-February 2020 (and don’t the authorities “smooth” the data?).
3. Capital outflows from emerging markets over the past few weeks have far outpaced anything
ever seen in any crisis (Asian crisis, dot com, GFC, EU debt crisis, et al.)
4. The S&P 500 fell by over 30% in 22 days – the fastest drop ever (and then had the sharpest
rebound since the Depression).
… do you want to be the one forecasting what comes next?

The 2020 Global Recession Is Here and Now
Not shown: we expect unprecedented declines in sequential growth (q/q saar) in the coming quarters.
GDP Growth Forecasts (%)

10
8
6
4
2
0
-2
United Eurozone China India 1/ Japan Russia Brazil World 2/
States 2019 2020 2021
Source: S&P Global Economics, Oxford Economics.
Policy: Use The Kitchen Sink, Be Countercyclical, Time Bound
Lessons have been learned from the GFC and Euro Debt Crisis!
Monetary Policy – Use the balance sheet

• Cut rates to zero, buy assets to hold down risk-free yields
• Stand ready to intervene in CP, MM and even corporate (IG) credit markets to support liquidity
and ensure that markets function reasonable well.
Macro-Prudential Policy – Be counter cyclical

• Ease capital burdens to allow banks to lend and absorb shocks.
• Flexibility around repayments, foreclosures in return to lending to critical sectors.
Fiscal Policy – Support the most vulnerable, pave the way for recovery
• Support labor market and SMEs, and keep them intact as much as possible.
• Use guarantees to ease borrowing costs and financial conditions.
Bottom line: think big, but make it temporary and conditional on “good” behavior.
Thinking About the Recovery: V’s, U’s, and Others (single wave)
Is COVID-19 just a demand shock, a temporary supply shock, or a growth shock?
Original output 100, q/q growth = 0.5%

COVID Recovery Scenarios (in levels)
10% hit in Q2 2020, 0% Q3 2020. 108
106
Case A (demand only shock): recover 104
output over 4 quarters, back to old path
102
100
Case B (case A + one-off supply loss):
98
lose 2% of GDP in Q3 2020, but
otherwise follow path A. 96
94
Case C (case B + lower trend growth): 92

recovery is 4/5ths of case B, lower 90
trend q/q growth 0.4% 2019 2020 2020 2020 2020 2021 2021 2021 2021 2021 2021 2021 2021
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Old Base A B C
Source: S&P Global Economics.
Chris Rogers
Quantamental Research – Supply Chains
S&P Global Market Intelligence Panjiva
Q2 2020 Supply Chain Outlook April 2020
Through a COVID-19 lens, darkly
Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P
Global Market Intelligence. Not for distribution to the public. Copyright © 2020 by S&P Global Market Intelligence.
All rights reserved.
Decision making in an uncertain environment
Non-financial data more important than ever
Source: Panjiva, part of S&P Global Market Intelligence.

Data as at March 31, 2020
Permission to reprint or distribute any content from this presentation requires the prior
written approval of S&P Global Market Intelligence. Not for distribution to the public.
Copyright © 2020 by S&P Global Market Intelligence. All rights reserved.
Lockdowns have a significant impact on trade
Shipping from China shows what wider lockdowns may bring

The bullwhip effect – demand falling as supplies return
Wave of disruptions could roil supply chains for months

The right stuff - Logistics face plethora of challenges
Deliveries can’t be guaranteed, risk of force majeure rises

Medical hoarding a persistent problem
Manufacturing, protectionist issues won’t clear quickly

16
Trade deals on hold
U.S.-China trade relations likely to get worse

17
Trade deals on hold
Brexit withdrawal extension vital for supply security

18
Through a COVID-19 glass, darkly
Conclusions
Corporate uncertainty makes alternative data more important than ever

Lockdowns set to cause significant supply chain disruption
Bullwhip effect may mean it takes months for supply chains to normalize
Logistics industry has slew of technical issues to address, service levels can’t be guaranteed
Healthcare supply industry faces protectionist as well manufacturing challenges
Trade deals on hold, China-U.S. relations may worse, Brexit extension vital
Find out more:

• panjiva.com/research
• https://www.spglobal.com/marketintelligence/en/topics/coronavirus

19
Copyright © 2020 by S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.
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S&P Global Market Intelligence’s opinions, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of
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may provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index.
S&P Global Market Intelligence assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for
the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P Global Market
Intelligence does not act as a fiduciary or an investment advisor except where registered as such. S&P Global keeps certain activities of its divisions separate from each other in order to
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divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to
disseminate its opinions and analyses. S&P Global's public ratings and analyses are made available on its Websites, www.standardandpoors.com (free of charge) and
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our ratings fees is available at www.standardandpoors.com/usratingsfees.
20
COVID-19 & Leveraged Loans
Rachelle Kakouris
Director
Leveraged Commentary and Data
Unprecedented volatility and sectors in distress April 7, 2020
Loan prices decline at fastest pace on record
22
Pushing secondary prices toward 2009 lows
110 Weighted average bid of US loans

100
90
80
70
60
50
03/31/06 03/31/08 03/31/10 03/31/12 03/31/14 03/31/16 03/31/18 03/31/20
Source: LCD, an offering of S&P Global Market Intelligence; S&P/LSTA Leveraged Loan Index
23
March dominates largest single-day losses
24
The result: a brutal repricing
25
Loans below 80 far exceed ’08 crisis levels
Breakdown of the performing loans in S&P/LSTA LLI

$1400B 1
$1200B
0.8
$1000B
Distress ratio
$800B Distressed volume 0.6
spikes to $672B→
$600B 0.4
$400B
0.2
$200B
$0B 0
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Distress amount Non-distress amount Distress ratio
26
Sectors previously insulated from China supply-chain
disruptions now feeling the pain
27
Industry returns March 2020
28
Impacted sector distress rises sharply
Distress ratio by industry

Oil and gas
Leisure
Insurance
3/23/2020
Industrial equipment
Automotive 2/28/2020
Telcommunications 12/31/2019
Business equipment and…
Electronics/electric
0% 20% 40% 60% 80% 100%
Percent of loans trading below 80
29
Industry downgrade pressure
20 Issuer downgrades in March – S&P/LSTA Index

15
10
5
0
30
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31
Voice of the Enterprise:
Digital Pulse, Coronavirus
Flash Survey, March 2020
Liam Eagle
Research VP, Voice of the Enterprise &
Voice of the Service Provider
451 Research
April 7, 2020
Coronavirus: The Global Impact Webinar
Most Enterprises Expect a Major Disruption to their Business
52% of enterprises surveyed expect to experience a major disruption to their

business within 6 months
13% 26% 13% 21% 28%
Already or less than a month 1-3 months 3-6 months More than 6 monthts Indefinitely
41%
25% 27% The portion prepared to go
21% indefinitely without disruption
dropped from 41% to 21% in 10
days
Mar 10-11 (n=44) Mar 12-13 (n=36) Mar 14-17 (n=401) Mar 18-19 (n=75)
Q:If the situation surrounding the coronavirus outbreak continues in its current state, how long is your organization equipped to function before a major disruption to its business occurs (e.g., inability to meet debt obligations or deliver
agreed-upon services, loss of a major client or contract)?
Base: All respondents (n=556)
Source: 451 Research's Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey March 2020
33
Immediate and Impending Disruption of Operations
Reduced or delayed supply of parts or materials 27% 25% 6% 43%
Reduced or delayed access to services 32% 30% 4% 34%
Loss or reduction of customer demand 32% 26% 5% 37%
Increased strain on internal IT resources 41% 14% 3% 43%
Reduction in employee productivity 40% 22% 2% 37%
Reduced access to clients or prospects (e.g., canceled

66% 14% 2% 17%
meetings)
Currently Within 3 months More than 3 months Don't expect to experience
Q: Please indicate whether your organization is currently experiencing or expects to experience each of the following as a result of the coronavirus outbreak.?
34
A Permanent Influence on Ways of Working is Likely
Travel limitations/bans 74% 7%

Not attending events we have attended in the past 67% 12%
Expanded/universal work from home policies 65% 10%
Delaying/canceling company events 62% 13%
External in-person meeting limitations 60% 14%
Internal in-person meeting limitations 54% 12%
Office closures (temporary or permanent) 33% 17%
Expanded employee leave rules 27% 16%
Workforce reductions or work furloughs 11% 15%
Diversifying supply chain or suppliers 6% 8%
Currently in place (n=748) Plan to implement (n=594)
Q: Which, if any, of the following strategic plans has your organization delayed, reduced or halted as a result of the situation surrounding the coronavirus outbreak? Please select all that apply.
Q: Do you expect your organization to put any of the following new policies or changes into place as a result of the circumstances surrounding the coronavirus outbreak? Please select all that apply.
Q: Do you expect any of these new policies or changes to remain in place long-term and/or become permanent? Please select all that apply.
Base: All respondents
35
New Technology Investments to Support New Working
Conditions
43%
Employee communication/collaboration technologies 34%
63%
37%
Mobile devices/services (e.g., phones, tablets,… 31%
53%
32%
Bandwidth/network capacity 22%
55%
28%
Information security software/tools (e.g., VPN) 21%
46%
18%
External/hosted/cloud IT infrastructure 16% Total (n=662)
22%
17%
Internal IT infrastructure 13% <$1B revenue
26% (n=397)
8%
Third-party services (e.g., installation, managed… 6%
11%
29%
None 37%
11%
Q: Which, if any, of the following technology products or services do you expect your organization to spend more on as a result of the circumstances surrounding the coronavirus outbreak? Please select all that apply.
36
Demand on IT Resources Will Increase, But Not Overwhelm
Most expecting increased strain on internal IT resources
41% 14% 3% 43%
Currently Within 3 months More than 3 months Don't expect to experience
More spending on IT resources and assets overall
3% 63% 34%
Spending less No change Spending more
Enterprises feel equipped to handle additional IT requirements
2% 7% 52% 39%
Not at all equipped Not very well equipped Somewhat equipped Totally equipped
Q: Please indicate whether your organization is currently experiencing or expects to experience each of the following as a result of the coronavirus outbreak. - Increased strain on internal IT resources (n=742)
Q: For each of the following expense categories, please indicate whether your organization is spending more or less money as a result of the coronavirus outbreak. - IT resources/assets (n=642)
Q: How equipped are your organization's IT systems to handle the requirements of any new policies resulting from the circumstances surrounding the coronavirus outbreak? (n=752)
Base: All respondents
37
These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable. No content
(including index data, ratings, credit-related analyses and data, research, model, software or other application or output therefrom) or any part thereof (Content) may be modified,
reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P Global Market
Intelligence or its affiliates (collectively, S&P Global). The Content shall not be used for any unlawful or unauthorized purposes. S&P Global and any third-party providers, (collectively S&P
Global Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Global Parties are not responsible for any errors or omissions, regardless of the
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OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event
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recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P Global Market Intelligence may
provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index. S&P
Global Market Intelligence assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the
skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P Global keeps certain activities
of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have
information that is not available to other S&P Global divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain non-public information
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S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to
disseminate its opinions and analyses. S&P Global's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge) and
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Market Intelligence News & Research on the virus
1. Coronavirus Newsletter – curated,
weekly, free to clients & non-clients
summarizing Coronavirus impact across
news & research
https://pages.marketintelligence.spglobal.com/Coronaviru
s-Newsletter-Sign-Up.html
2. Issue In Focus on Coronavirus –

aggregates MI News coverage on MI
desktop
https://platform.mi.spglobal.com/web/client?#news/issuein
focus?id=1043
:
3. Alerts News & Research keyword
‘coronavirus’ or ‘Covid-19”, customizable
by industry and/or geography
4. S&P Global website: www.spglobal.com or

https://www.spglobal.com/en/research-
insights/featured/economic-implications-of-coronavirus
39
Q&A
Moderator:
Gary Regenstreif Paul Gruenwald Chris Rogers Rachelle Kakouris Liam Eagle
Executive Editor, News Global Chief Economist Supply Chain Analyst Director Research VP, Voice of the
S&P Global Market S&P Global Ratings S&P Global Market LCD Research Enterprise & Voice of the
Intelligence Intelligence Panjiva Service Provider
451 Research
(now a part of S&P Global
Market Intelligence)
*Statements by persons who are not S&P Global Market Intelligence employees represent their own
views and opinions, and are not necessarily the views of S&P Global Market Intelligence.
Permission to reprint or distribute any content from this presentation
requires the prior written approval of S&P Global Market Intelligence. 40
These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable. No content (including
index data, ratings, credit-related analyses and data, research, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered,
reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P Global Market Intelligence or its affiliates (collectively,
S&P Global). The Content shall not be used for any unlawful or unauthorized purposes. S&P Global and any third-party providers, (collectively S&P Global Parties) do not guarantee the
accuracy, completeness, timeliness or availability of the Content. S&P Global Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the
use of the Content. THE CONTENT IS PROVIDED ON “AS IS” BASIS. S&P GLOBAL PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT
THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall
S&P Global Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses
(including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such
damages.
S&P Global Market Intelligence’s opinions, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of
fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P Global Market Intelligence
assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the
user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P Global Market Intelligence does not act as a fiduciary or an investment
advisor except where registered as such. S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective
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• There is no analytical framework/history to map a global pandemic into macro variables

• Macro/business/employment vs public health trade-offs can be complicated.

COVID-19 Cases in 2020

… do you want to be the one forecasting what comes next?

GDP Growth Forecasts (%)

Monetary Policy – Use the balance sheet

Macro-Prudential Policy – Be counter cyclical

Original output 100, q/q growth = 0.5%

Case C (case B + lower trend growth): 92

Q2 2020 Supply Chain Outlook April 2020

Through a COVID-19 lens, darkly

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Source: Panjiva, part of S&P Global Market Intelligence.

Corporate uncertainty makes alternative data more important than ever

Find out more:

Source: Panjiva, part of S&P Global Market Intelligence.

Unprecedented volatility and sectors in distress April 7, 2020

110 Weighted average bid of US loans

Breakdown of the performing loans in S&P/LSTA LLI

Distress ratio by industry

20 Issuer downgrades in March – S&P/LSTA Index

52% of enterprises surveyed expect to experience a major disruption to their

13% 26% 13% 21% 28%

Reduced or delayed supply of parts or materials 27% 25% 6% 43%

Reduced or delayed access to services 32% 30% 4% 34%

Loss or reduction of customer demand 32% 26% 5% 37%

Increased strain on internal IT resources 41% 14% 3% 43%

Reduction in employee productivity 40% 22% 2% 37%

Reduced access to clients or prospects (e.g., canceled

Currently Within 3 months More than 3 months Don't expect to experience

Travel limitations/bans 74% 7%

Currently in place (n=748) Plan to implement (n=594)

Most expecting increased strain on internal IT resources

41% 14% 3% 43%

Currently Within 3 months More than 3 months Don't expect to experience

More spending on IT resources and assets overall

Spending less No change Spending more

Enterprises feel equipped to handle additional IT requirements

2. Issue In Focus on Coronavirus –

4. S&P Global website: www.spglobal.com or

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