Virus crisis to bite retail sector, spur industrial growth – Moody’s

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Virus crisis to bite retail sector, spur industrial growth – Moody’s

International rating agency Moody’s says demand for inner-city office space and housing is likely to be materially lower after the virus crisis, stressing this will also affect the growth of online shopping which will have a lasting impact on the retail sector.

The travel sector, including airlines and hotels, will similarly be transformed, Moody’s said.

While these far-reaching transformations could ultimately create more efficient economic structures or open up new industries, the social and economic costs will prove challenging for policymakers, Moody’s said.

The rating agency, however, cautioned government to strengthen their institutional framework in order to withstand and respond effectively to the virus crisis in the wake of the second wave of the pandemic seen in other countries.

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“The strength of a government’s institutional framework is a critical driver of its ability to withstand and respond effectively to crises. In the current crisis, governments that are better able to develop and implement policies that effectively support the economy at the lowest fiscal cost – which will generally be those with the highest institutional strength scores – will tend to fare better,” Moody’s said.

Conversely, the rating agency said in countries with weaker institutional frameworks, particularly those with less developed financial markets and limited demand for local-currency government debt, measures perceived as debt monetization can very quickly undermine credibility and create instability.

“The inevitable alternative of high reliance on external funding, most often in foreign currencies, implies costly and volatile borrowing costs for these governments, especially if they have a weak record of effective policymaking,” it added.

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The rating agency said highly rated sovereigns with strong economies and institutions and low borrowing costs have been and will remain better able to withstand the impact of the crisis.

Their credit profiles are consequently more resilient and their ratings likely to prove more stable. Conversely, those exposed via any of the channels previously identified – through a sustained fall in growth and rise in debt, or through exposure to energy and commodities prices or to refinancing risk – are more exposed, Moody’s said.

Ghana was rated B3 negative by Moody’s and is among the countries most exposed to such risk.

SOURCE: ghanaweb.com

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