Moody Investor Services (Moody’s) has said that the coronavirus pandemic still poses significant credit risks for many sectors and issuers.

In the year since the World Health Organisation (WHO) declared COVID-19 a pandemic on 11 March 2020, the virus has disrupted the global economy and triggered a credit downturn accompanied by a spike in bond defaults, said Moody’s.

“We do not expect to conduct another wholesale review of our credit ratings this year unless there is a significant shock to the global economy or to financial markets, or a shock resulting from a dramatic change in the trajectory of the virus,” said Moody’s.

It said that the credit challenges arising from COVID-19 have been substantial, but the credit downturn likely will be relatively short-lived. It added that risks remain more significant for the sectors most vulnerable to restrictions on their normal activities.

It added that the pandemic though is abating, does not mean that COVID-19 will disappear. “The pandemic's evolution will critically depend on vaccine rollout, which should support a gradual easing of public health measures aimed at virus containment, allowing some ‘return to normalcy’.”

Moody projected that most economies will not return to pre-pandemic activity levels until 2022. “We continue to expect a slow and bumpy global recovery. Despite the relative stability of our forecasts since last April, uncertainty around the macroeconomic outlook remains much higher than usual.”

Whereas, policy actions will continue to support economic activity and financial markets after the pandemic has eased.

It stated that the initial financial market reaction to COVID-19 was even sharper than the economic impact, but recovery has been much swifter. “Policymakers will continue to support economic activity long after the pandemic has faded, in some cases for years,” it said.