Covid-19 Eff

ects
Prepared By Samarth Chawla
 Hypothetical
Best case Moderate case Worse case
worst case*
Sector as % of as % of as % of as % of as % of as % of as % of as % of
sector sector sector sector sector sector sector GDP sector
GDP employmen GDP employm GDP employme employmen
Agriculture, Mining and -0.01 t
-0.01 ent
-0.02 -0.01 -0.04 nt
-0.02 -1.62 t
-1.70
Quarrying
Business, Trade, -0.01 -0.01 -0.01 -0.01 -0.03 -0.03 -1.11 -1.16
Personal, and Public
Services
Light/Heavy -0.01 -0.01 -0.02 -0.01 -0.03 -0.02 -0.57 -0.62
Manufacturing, Utilities,
and Construction
Hotel and restaurants -0.10 -0.09 -0.18 -0.17 -0.31 -0.29 -1.64 -1.64
and Other Personal
Services
Transport services -0.03 -0.01 -0.04 -0.02 -0.07 -0.04 -1.25 -1.24
TOTAL (Economy-wide) -0.01 -0.01 -0.02 -0.02 -0.04 -0.03 -1.10 -1.31
*The "Worst case" scenario is hypothetical, presenting the impact if a significant outbreak occurs in a country and should NOT be interpreted as a judgment on the
likelihood of an outbreak occuring there.
sector 2018 nominal gdp scenario as % of total GDP in $ Mn Employment (in 000) as % of sector GDP as % of sector employment
Agriculture, Mining and Quarrying 2718732.23 best case 0.00 52.64 14.38 -0.01 -0.01
Business, Trade, Personal, and Public Services 2718732.23 best case 0.00 127.01 10.32 -0.01 -0.01
Hotel and restaurants and Other Personal Services 2718732.23 best case 0.00 108.84 24.60 -0.10 -0.09
Light/Heavy Manufacturing, Utilities, and Construction 2718732.23 best case 0.00 59.86 7.51 -0.01 -0.01
Transport services 2718732.23 best case 0.00 38.58 3.12 -0.03 -0.01
_All 2718732.23 best case -0.01 386.92 59.93 -0.01 -0.01
Agriculture, Mining and Quarrying 2718732.23 moderate case 0.00 88.05 28.32 -0.02 -0.01
Business, Trade, Personal, and Public Services 2718732.23 moderate case -0.01 196.44 16.34 -0.01 -0.01
Hotel and restaurants and Other Personal Services 2718732.23 moderate case -0.01 201.83 45.59 -0.18 -0.17
Light/Heavy Manufacturing, Utilities, and Construction 2718732.23 moderate case 0.00 98.88 14.13 -0.02 -0.01
Transport services 2718732.23 moderate case 0.00 54.74 4.71 -0.04 -0.02
_All 2718732.23 moderate case -0.02 639.95 109.08 -0.02 -0.02
Agriculture, Mining and Quarrying 2718732.23 worse case -0.01 161.90 46.10 -0.04 -0.02
Business, Trade, Personal, and Public Services 2718732.23 worse case -0.01 381.78 32.25 -0.03 -0.03
Hotel and restaurants and Other Personal Services 2718732.23 worse case -0.01 352.27 79.60 -0.31 -0.29
Light/Heavy Manufacturing, Utilities, and Construction 2718732.23 worse case -0.01 206.67 28.63 -0.03 -0.02
Transport services 2718732.23 worse case 0.00 100.71 9.08 -0.07 -0.04
_All 2718732.23 worse case -0.04 1203.33 195.66 -0.04 -0.03
Agriculture, Mining and Quarrying 2718732.23 hypothetical worst case -0.25 6897.07 4575.79 -1.62 -1.70
Business, Trade, Personal, and Public Services 2718732.23 hypothetical worst case -0.58 15861.48 1390.65 -1.11 -1.16
Hotel and restaurants and Other Personal Services 2718732.23 hypothetical worst case -0.07 1835.89 451.46 -1.64 -1.64
Light/Heavy Manufacturing, Utilities, and Construction 2718732.23 hypothetical worst case -0.12 3391.38 824.13 -0.57 -0.62
Transport services 2718732.23 hypothetical worst case -0.07 1931.28 291.66 -1.25 -1.24
_All 2718732.23 hypothetical worst case -1.10 29917.11 7533.67 -1.10 -1.31
KPMG- SIX CONSIDERATIONS IN DEALING
WITH THE IMPACT OF COVID-19
• 1) Employees
How you treat your employees now will have a massive effect on their wellbeing, and consequently on their
loyalty and productivity. 
Financial Services institutions all over the world are making significant changes to working arrangements – in
some cases speaking with regulators to ensure that these meet compliance expectations – and this is helping
them continue to deliver services to their customers.
• 2) Customers
Customers still have needs, and this includes regular reassurance from their Financial Services providers on
continuity of service delivery.  They also need to know how their providers are dealing with issues directly
related to COVID-19 – health and travel insurance, investment portfolio performance, online payment
facilities.  For companies, effective digital delivery of services is essential while organisations deal with staff
shortages, office closures and other public health protection measures (e.g. businesses refusing to handle
cash). 
• 3) Liquidity
Financial Services companies need to thoroughly understand their available capital and liquidity resources and to assess the resilience of
these.  Central banks are under pressure to deliver stimulus packages in order to offset a larger, systemic liquidity crunch. This will bring
down borrowing costs, but there is a risk that some companies will hoard cash and open credit lines to keep their businesses going
through the crisis.
• 4) Supplier relationships and third party dependency
FS companies (and their customers) have substantial third party networks – vendors (including in-person agent networks), outsourcing
partners, technology provider, etc.  They need to regularly assess and monitor these third parties on information security, business
continuity and other risk domains.  The COVID-19 crisis forces companies to review these suppliers, assess which are most likely to be
impacted, which are critical to ongoing business operations, and where they need to urgently mitigate risks posed by these relationships.
• 5) Communications and transparency
As the business and the economic impacts of the crisis begin to bite, FS companies will need to ensure that they are communicating
effectively with multiple stakeholders: employees, customers, shareholders and regulators.  The crisis is a breeding ground for
disinformation and rumour, so FS companies need to ensure that they are clear about the steps they are taking to manage the impact of
the pandemic.  Regulators expect FS companies to focus on and ensure continuity of their core operations, including support for their
customers. And FS companies need to regularly assess their digital communication capabilities, and how to leverage such capabilities to
communicate with customers and the broader marketplace.
• 6) Scenario planning
Financial Services companies are in the business of imagining the future – understanding the significant immediate challenges to society
and economies posed by this pandemic, and how this will impact the interconnected financial system.  They are using their scenario
modelling and contingency planning expertise to help themselves and their customers to make good decisions in the face of a highly
volatile operating environment.  They will also need to incorporate new indicators, prioritized by the COVID-19 outbreak, into their
decision making activities.
•  
Grant Thorton - Analysis
• 1. Cash is king - understand your cash and working capital needs
• Cash is the lifeblood of any business. In a volatile and slowing economy, getting an immediate handle on your daily cash
needs is essential. Take a critical view of operations, review existing cash flow forecasting processes and understand how
potential disruptions to operations may affect liquidity.
• Run scenario analyses on your financial and cash forecast and understand how that interacts with short-term liquidity
needs. This exercise may also highlight any borrowing base or covenant beaches that you could be facing and can help
shape any short-term management decisions.
• Look for opportunities to build a war chest of cash and investigate whether drawing down on credit facilities could be
prudent for safeguarding your business.
• Strategically manage working capital, potentially selling inventory or minimizing new inventory purchases to generate cash.
Take a critical look at working capital KPIs such as days payable outstanding and days sales outstanding and understand
impact of stretching these days in either direction. Assess capital expenditure requirements and defer non-essential
spending if possible.
2. Cost optimization - be relentless on cost control
• Maintaining your current or historical levels of profitability in an environment where supply and demand fundamentals are
decreasing simultaneously can be difficult without closely analyzing spending.
• Develop a strategy: do not execute cost-cutting initiatives at the risk of compromising revenue generating capabilities or
diminishing value.
• Review fixed and variable costs carefully and determine what costs you actually need to run the business.
• Develop and monitor cost reduction initiatives, such as rationalizing SG&A, taking a close look at headcount and instituting
policies that encourage and reward cost savings and conservation.
3. Evaluate customers and suppliers
• In times of economic uncertainty, businesses could see increased pressure on the purchasing power and credit-worthiness
of customers while also facing tighter credit terms and product availability from suppliers.
• Do not assume your customers are financially healthy. Re-evaluate credit terms with current customers, negotiate the
shortest reasonable terms, and carefully review the credit-worthiness of each new customer before extending credit.
• Continuously monitor accounts. Failing to collect receivables timely (or even on an accelerated basis) may result in a cash
flow shortfall that could have an immediate impact on all areas of your business.
• Negotiate for the most favourable credit terms with suppliers and critically evaluate your supplier base to determine if
your current agreement is still the most favourable for your business.
4. Communicate early and often with your lenders
• Your existing lenders will likely know you and your business best. Communicate with them early and
often, explaining any situations that may arise and the actions you propose to address them.
Transparency and open communication will serve you both well. Your existing lender could be your
fastest source of additional liquidity.
• Evaluate potential covenant breaches based on the outcome of various scenario analyses impacting
your financial forecast.
• Conduct detailed modelling of your working capital facilities, particularly with asset-based loans, which
can change their availability formulas due to updated net orderly liquidation values via new appraisals.
• Stay current on your debt if possible and assess capital structure concerns, including whether you
should consider refinancing or recapitalization alternatives.
• Engaging in key stakeholder and lender discussions early can provide you the time and liquidity to
address your immediate potential financial challenges.
 UNTAD REPORT-Averting a Global Crisis

• For advanced country governments, now scrambling to contain the economic impact of the Covid -19
pandemic, the challenge - is compounded by persistent fragilities surrounding highly speculative financial
positions, in particular, the already unsustainable debt burdens associated with highly leveraged corporate
loans. These have been built up over the last decade of easy money and against a backdrop of heavily
underregulated ‘high-tech-cum-gig economies’ and deeply ingrained income inequalities. In addition, the
avalanche of cheap credit since 2008 has also spilled over to developing countries, creating new financial
vulnerabilities and undermining their debt sustainability.
• In the past days a series of stimulus packages -- unprecedented in both scale and scope -- have been
announced by the major developed economies and China to extenuate the mounting economic damage and
respond to the health crisis.
• We estimate a boost to the national incomes of advanced economies and China of about $1.4 trillion in 2020,
substantially smaller than the headline values of the packages. This no doubt will have a positive impact not
only on their own economies but the world economy as well.
• Although this will, in all likelihood, not prevent a global contraction this year it should (hopefully)avert the
recession turning in to a prolonged depression. It should also contribute to stemming the fall in the prices of
both financial assets and commodities and will partially alleviate the negative growth impact from the crisis
on developing countries.
• Developing countries, however, face distinct pressures and constraints which make it significantly harder for
them to enact effective stimulus without facing binding foreign exchange constraints
• 
• The shock of the lightning
• Many developing countries were slowing down in the final quarter of last year
with several entering recession. However, the speed at which the economic
shock to advanced economies has hit developing countries – in many cases in
advance of the health pandemic -- is dramatic, even in comparison to the 2008
global financial crisis.
• Both debt and equity, from main emerging economies amounted to $59 billion in
the month since the Covid-19 crisis went global (21February to 24 March). This is
more than double the portfolio outflows experienced by the same countries in
the immediate aftermath of the global financial crisis ($26.7 billion).
• Commodity prices have also dropped precipitously since the crisis began. A fall in
oil prices, which would be expected from a drop in global demand, has been
amplified by disagreements among the main producers on how to deal with this,
with Brent crude falling 63 percent in the year to date. In the last 25 years,
similar declines occurred only after the Global Financial Crisis (GFC) of 2008.
This time things are different From GFC 2008 (Global Financial Crisis)
• First, the full effects of the health crisis have yet to hit many developing
countries, and we have yet to reach the “end of the beginning” of the economic
crisis in the advanced economies.
• Second, many of the conditions that produced a sharp bounce back in
developing countries after 2010 are no longer present or a good deal weaker.
• China’s massive stimulus in 2009 and rapid return to double digit growth had
strong positive effects on demand for the exports of developing countries.
• Northern investors operating under the loose monetary policy adopted by
leading Central Banks heightened their appetite for risky assets, producing a
rapid rebound in capital inflows in emerging and other developing countries.
• The Increase in the South South Trade had let he Developed world believe that
the developing world was decoupled from the developed countries. These
conditions are not likely to be repeated.
• There is weakening an diminishing Fiscal space for the Developing Countries.
• Third, the strong recovery in developing country trade that occurred in 2010 seems less likely this time.
• Even if the damage to global supply chains is not irreparable, as lead firms recover from the crisis they will likely
have to rethink their business model, including fewer links in these chains, and with more that are closer to home.
• China has diminished its dependence on external suppliers.
• Many countries are still have very little diversification of economic activities leaving them vulnerable.
 
• Fourth, the current fall of commodity prices has started from a lower value compared to what happened in the GFC
when the world economy was at the peak of the “super commodity cycle” and appears to be more broad based.

• Fifth, new vulnerabilities have emerged that are likely to hold back growth.
 
• Emerging Economies have seen a built up of private Debt and increased penetration in the Market of Non Resident
Investors, foreign Banks and other financial investors. As well as allowing their residents to invest abroad.
• There has also been a strong shift in the ownership of central government debt, including public external debt, from
official to private creditors and shadow-banking actors.
• There is threat of transfer of funds to developed countries through various channels.
 Finally, developing countries’ ability to build up international reserves as a buffer against macroeconomic shocks has
been weakening.
 
• Given the massive expected impact of the Covid-19 crisis, reliance on such self insurance is not an option, with
reserves likely being drained very fast.
• The looming financing gap in developing economies
 
The first channel is the pressure on government budgets from the public health crisis. 
• While developed countries have the administrative capacity and (generally) the fiscal space to buttress their
social protection systems and protect private incomes, in developing countries sharp contractions of incomes
are all but inevitable along with falling fiscal revenues.
 
The second Channel is International Trade. 
• Even after considering implementation of the effective $1.4 trillion stimulus by advanced economies and China,
a rapidly slowing growth in these countries will take place through 2020. This will mean significantly lower
demand for exports for other developing economies. Estimated Loss in Exports is $800 Billion along with a
drastic fall in the currency vis-à-vis the US dollar. The Imports will contract by $ 575 billion an over all drop of
trade balance of $ 225 billion.
 
The Third Channel is Financial.
 Total developing country debt stocks stood at 193 per cent of their combined GDP at the end of 2018, the highest
on record, compared to just over 100 per cent in 2008.
• In addition to rising debt servicing costs since 2012, developing countries also already face a wall of repayments
due on foreign-currency denominated public debt over this year and the next. The total amount of sovereign
debt repayments due at the end of 2021 is $2.7 trillion ($1.62 trillion in 2020 and $1.08 trillion in 2021). In
normal circumstances this debt would have been refinanced but this may not happen in the current scenario.
• What is to be done
• First, a coordinated global response to liquidity shortages to address immediate financing needs.
• While the recent pledge by the Group of 20 to inject $5 trillion into the global economy to limit
• economic losses from the Covid-19 crisis is welcome, how effective any such rescue package will
• be, and how much of it will reach developing countries, remains to be seen and depends on specific measures.
• An Expansive use of SDR which is would be to ensure that around 730 billion SDRs ($1 trillion at the current
exchange rate) reaches the international reserve accounts of developing countries fast. This could be achieved
through a new allocation of SDRs and an IMF “designated” reallocation of current and new but unused SDRs
from advanced countries to poorer developing economies.
• 
• Second Capital Controls :
• Measures to curtail the surge in outflows, to reduce illiquidity driven by sell-offs in developing country
markets, and to arrest declines in currency and asset prices.
• 
• Third
• Temporary standstills on debt service payments, or a formal or informal agreement between a debtor and
one or more of its creditors to suspend these payments for a given period of time to allow debtors to propose
restructuring plans. During this time creditors cannot seek legal remedies, a critical provision to keep non-
cooperative and litigious creditors (or so-called vulture funds) in check.
• Fourth
• New Debt Relief Programmes : The World Bank and the IMF called on all official bilateral
creditors to suspend debt payments from the world’s 76 poorest economies, currently in receipt
of support from the International Development Association (IDA). In addition to sovereign debt
repayments due until the end of 2021 ( given above), another 42.75 trillion is scheduled for
repayment from 2022 through to 2024, of which 4482 billion are owed by low- and middle-
income country governments. For now, African Finance ministers have indicated that a waiver of
all interest payments on their debt, estimated at 444 billion for 2020, and a possible extension to
the medium-term would help to provide immediate fiscal space and liquidity to their
governments.
 
• Fifth
 Official Development Assistance (ODA) must be ring-fenced in all donor countries. Over the
decade since the financial crisis an additional $2 trillion would have reached developing
countries
had the 0.7 per cent (of global national income) ODA target been met by DAC members. This,
therefore, is the time, for donor countries to, finally, honour their collective commitment and
deliver ODA to developing countries in full and unconditionally.
Thank YOU