Deloitte Economics' Coronavirus Impact Monitor - Will strong government support prevent a severe economic downturn?
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Deloitte Economics’ Coronavirus Impact Monitor Will strong government support prevent a severe economic downturn? 3rd edition, March 26 2020
Corona virus outbreak
The number of COVID-19 respirator patients projected to stay below capacity levels
Confirmed COVID-19 cases: World and Denmark
450,000 416,686 3,000
• Between 20 January 2020 and today, 26 March 2020,
# confirmed cases Denmark
400,000
# confirmed cases globally
the number of global confirmed COVID-19 cases has 2,500
350,000
risen from seven to about 417k. 300,000
As of
2,000
26 March 2020
• In Denmark, the number of confirmed cases has risen 250,000 1,591
1,500
rapidly within the past three weeks, from only eight on 200,000
4 March 2020 to 1,591 on 26 March 2020. However, as 150,000 1,000
COVID-19 testing in Denmark has been sharply 100,000
500
reduced, the actual number of cases is almost surely 50,000
underestimated. 0 0
12-01-2020 26-01-2020 09-02-2020 23-02-2020 08-03-2020 22-03-2020 05-04-2020
Denmark (RHS) World (LHS)
COVID-19 patients in respirator and respirator capacity in
• The bottom chart shows that the number of COVID-19 Denmark
intensive care patients in respirator rose to 78 as of 26 1,000 925
March 2020. The government is monitoring this 900 827
closely, as it is committed to preventing a situation 800
Intensive care cases
# COVID-19 patients in
700 expected to peak around
where there is insufficient capacity of respirators. 925
600 827 thereby not
respirators are available for COVID-19 patients. exhausting max capacity
respirator
500
• The chart also shows a projection of COVID-19 400
patients in need of respiratory care from the Danish 300
200
Health Authority. The projection is based on Italian 78
100
data and suggests a peak in intensive care patients of
0
around 827 in week 6. The number of intensive care 25-03-2020 08-04-2020 22-04-2020 06-05-2020
patients is therefore not expected to breach capacity of Week 2 Week 4 Week 6 Week 8
COVID-19 patients in respiratory care Projected development of patients in respiratory care
respirators, according to the Danish Health Authority. from Danish Health Authority
Max capacity of respirators for COV-19
patients
Note: Projection of COVID-19 patients in respirator from the Danish Health Authority. The projection is based on the Italian experience/data.
Sources: Number of infected people taken from WHO; Number of people in respiratory care: Danish Health Authority (Sundhedsstyrelsen)
Coronavirus impact monitor – March 2020 Page 2 Deloitte Economics © 2020Impact on financial markets
European equity markets suffering major losses from the outbreak of COVID-19
Equity markets: Sectoral indices in Europe
• European equity indices have suffered material losses
following the COVID-19 outbreak in Europe. Major outbreak in Europe
• Especially the Transport industry, including airlines, was
Sectoral indices indexed to 100
110
severely affected by the spread of the virus and related
100
on January 2, 2020
travel bans. The EURO STOXX Transport index has been
down by some 42% since the end of January 2020, 90
driven by a material decline in volumes. 80
• The European energy sector, including oil and gas 70
companies, has lost more than 40% since the end of 60
January 2020. Declining energy prices have applied 50
downward pressure on energy equities.
40
• Financials, including banks, have also experienced value 01-01-2020 15-01-2020 29-01-2020 12-02-2020 26-02-2020 11-03-2020 25-03-2020
destruction. Market concerns about increased credit Transport Energy Pharmaceuticals Financial Technology
losses and funding squeeze are likely drivers.
Interest rates: 10Y Interest rate (swap) and 6M interest
• Other industries such as Pharmaceuticals and rates (CIBOR)
Technology have held up relatively well, as the sectors 0.4
are less exposed to a contraction in consumer spending. 0.3
• The outlook for increased public expenditure and central 0.2
bank interventions to ease liquidity strains appear to 0.1
% rates
have applied upward pressure on interest rates during 0.0
the past two weeks. The Danish Central Bank also hiked -0.1
the policy rate by 15bp on 19 March, applying upward -0.2
pressure on interest rates.
-0.3
• Equity market volatility remains elevated at levels not -0.4
experienced since the global financial crisis (see 01-01-2020 15-01-2020 29-01-2020 12-02-2020 26-02-2020 11-03-2020 25-03-2020
appendix). 10Y DKK Swap rates 6M CIBOR
Note: 1) All indices are on a European basis: EURO STOXX Transport, Energy, Pharmaceutical, Financials and Technology index
Sources: Thomson Reuters Eikon
Coronavirus impact monitor – March 2020 Page 3 Deloitte Economics © 2020Real economic impact
Consumer spending is falling, unemployment is rising, and business sentiment points to
sharp contraction in economic growth
• This crisis has pushed the global and Danish economies into unchartered territory:
• Consumer spending appears to be in a sharp contraction, see charts below. Spending on restaurants is down almost 80%, as most restaurants
are open only to a limited extent. Transportation spending continues to slide as most workplaces and shops close down. Grocery spending
almost doubled on March 12 and 17, likely reflecting material stock builds. Since then, grocery spending appears to have stabilised at a level
around 25% above spending levels last year.
• Almost 30.000 Danes have lost their job since 11 March when the country was locked down. It corresponds to an increase in the unemployment
rate of about one percentage point.
• A preliminary read on business sentiment across the Euro area deteriorated sharply in March, see chart in the Appendix. This deterioration
points to a sharp contraction in GDP of almost 2%, deeper than the contraction experienced during the Global Financial Crisis.
• M&A activity in Denmark during Q1-2020 is on track to reach the lowest level observed since 2014, see Appendix. However, M&A activity has
been sliding lower during 2019; the low level of M&A activity is not only driven by the Corona outbreak.
Dramatic slowdown in consumer spending patterns in Denmark
Restaurant spending index Grocery spending index Transportation spending index
(100 = same weekday in 2019)
(100 = same weekday in 2019)
(100 = same weekday in 2019)
120 200 120
100 100
150
80 80
Index
Index
Index
60 100 60
40 40
50
20 20
0 0 0
0 2 4 6 8 10 12 14 16 18 20 22 24 0 2 4 6 8 10 12 14 16 18 20 22 24 0 2 4 6 8 10 12 14 16 18 20 22 24
Date March 2020 Date March 2020 Date March 2020
Note: Based on transactions with cards and MobilePay, Danske Bank has compiled detailed consumer spending data
Sources: Danske Bank, Deloitte analysis
Coronavirus impact monitor – March 2020 Page 4 Deloitte Economics © 2020Aid packages
Governments all over the World have introduced large aid packages
• Governments all over the World have introduced large aid packages to ease the severe consequences of the COVID-19 pandemic and the extraordinary
measures taken by governments to avoid the virus to spread, which in practice have led to a lock-down of major parts of the economies.
• In most countries the total size of the aid packages is over 2% of GDP.
• The aid packages typically include measures such as postponement of tax and VAT payments, compensation to employee retention, compensation for
reduced turnover and state-guaranteed loans (see appendix).
• Denmark is among the countries, who have introduced the largest aid packages compared to GDP.
Government aid packages as % of national GDP (selected countries)
Fiscal Credit
14.0%
12.2%
9.5%
9.0%
9.8%
6.0%
4.4%
4.0% 3.8% 3.5%
2.0% 1.9%
3.3% 1.5% 1.3% 1.3%
2.4%
0.3%
0.5%
UK Denmark Austria USA Sweden Germany New Zealand Norway Canada Greece France Italy Finland China Japan
Coronavirus impact monitor – March 2020 Page 5 Deloitte Economics © 2020Economic Outlook: Deloitte survey
Severe slowdown of the world economy throughout 2020
• The disruption of the global supply and demand chain, as well as financial markets translates into an
Economic growth projections
adjustment of economic growth projections worldwide:
3.3%
• According to the OECD, the global economy in 2020 is expected to grow by 2.4% instead of the 2.9%
initially estimated 2.9%, while European growth slows down from 1.1% to 0.8%. 2.4%
• In Denmark, bank estimates from Nordea Markets project a decrease in economic growth rates from
1.5% to 1.0% or even 0.5% in the worst-case scenario. 1.5%
1.1% 1.2%
1.0%
• Nevertheless, projections for 2021 for global and European economic growth by the OECD remain optimistic 0.8%
and are subject to an upward adjustment to 3.3% and 1.2%, respectively, in response to the slowdown in
2020. However, please note that OECD has not updated its projections since our last report as of 19 March n/a
World Europe Denmark
• Deloitte’s latest survey among 3,000 colleagues and clients from all over the World on 26 March 2020 reveals
and increase in the proportions of respondents, who believe that the economy will recover already by the end 2020 forecast pre COVID-19
of 2020, compared to the previous survey on March 19 2020. In the same period the belief in the policy tools Revised 2020 forecast post COVID-19
available has increased significantly. The positive development is observed after a significant drop in the Revised 2021 forecast post COVID-19
expectations to the economy from March 12 to March 19 2020.
Results of Deloitte surveys
Do policymakers have sufficient
What will be the ultimate impact on When do you think activity will
policy tools to cushion the economy
economic growth of COVID-19? rebound in your economy?
from the COVID-19 shock?
3.5%
77.5% 46.1% Q2 2020 1.5%
Possibly severe but 0.0%
57.7% Yes 37.7%
short-lived slowdown
75.0% 57.1% 38.6%
Q3 2020 29.9%
24.0%
22.5% 53.9% 34.6%
Protracted and Q4 2020 28.4%
42.3% No 62.3%
severe downturn 40.0%
25.0% 42.9%
Q1 2021 23.3%
40.3%
and beyond 36.0%
Survey results on March 12, 2020 Survey results on March 19, 2020 Survey results on March 26, 2020
1) Deloitte surveys conducted on 12, 19 and 26 March 2020, involving about 3,000 colleagues and clients from all over the world
Deloitte surveys, OECD Economic outlook (November 2019) and Coronavirus update (March 2020) for global and EU figures; Nordea markets estimates for Denmark
Coronavirus impact monitor – March 2020 Page 6 Deloitte Economics © 2020Coronavirus heatmap
Deloitte Economic’s view on the short-term outlook across selected sectors in Denmark
Transport
• High short-term impact due to limitations on travel and supply Denmark
chain disruptions. Spending on transportation down almost 80%.
Sector
Consumer
• With less consumers in stores and store lockdowns, traditional Short-term Outlook
retail sales of nonessential consumer goods have faced a significant
sales decline.
Financials Transport High impact Slow recovery
• Changes in regulations may have prepared the Financial Services
industry to withstand the economic shock created by COVID-19.
The short to medium-term impact on the industry will be significant
(see appendix). Consumer High impact Moderate recovery
Energy & Resources
• Prices and demand for crude oil have decreased, and Danish energy
and utility companies are taking steps to ensure the security of Financials High impact Moderate recovery
supply on the Danish market.
Technology, Media & Telco (TMT)
• TMT sectors have held up relatively well. Challenges due to supply Energy & Resources High impact Moderate recovery
chain disruptions for some companies (see appendix).
Real Estate Technology,
Moderate impact Moderate recovery
• Sectors such as Retail, Leisure, Hospitality, and Transportation are Media & Telco
especially hit by the COVID-19 outbreak. This will affect investors
and their view on risks. However, demand for properties suited for
logistics will increase (see appendix). Real Estate High impact Moderate recovery
Life Science & Health Care (LSHC)
• Limited impact so far. Potential upside in scenario with increased Life Science &
Neutral/Low impact Growth opportunities
spending on vaccinations. Health Care
Industry
• High short-term impact due to supply chain disruptions. Priority is Industry High impact Moderate recovery
to reduce operating costs and review spending (see appendix).
Sources: Deloitte analysis, Dansk Erhverv
Coronavirus impact monitor – March 2020 Page 7 Deloitte Economics © 2020Key messages
The COVID-19 health crisis has hit the Danish economy with major drops in economic
activity and increased unemployment
• The number of confirmed COVID-19 cases has risen rapidly within the past three weeks, from only eight on 4 March 2020 to 1,591 on March 26, 2020.
However, as COVID-19 testing in Denmark has been sharply reduced, the actual number of cases may be underestimated.
• COVID-19 has caused severe damage on the world economy. The equity markets have suffered major losses, and equity market volatility has spiked to
levels not experienced since the global financial crisis. Supply chain disruptions and negative demand shocks have spread from China to the rest of the
world.
• In Denmark, especially the transport sector and hotels and restaurants have experienced a major decrease in revenue. Spending on restaurants is
down almost 80%. Transportation spending continues to slide as most workplaces and shops close down. Grocery spending, in contrast, increased
significantly during the last two weeks, but now appears to have stabilised at a level around 25% above spending levels last year.
• As the Danish government enforces extraordinary measures to prevent a wider spread of COVID-19 across the population, companies across all sectors
experience severe consequences of the COVID-19 pandemic. Almost 30.000 Danes have lost their job since 11 March when the country was locked
down.
• According to a Global Deloitte Economics survey among 3,000 colleagues and clients from all over the world on 26 March 2020, expectations are that
the economic slowdown will be deep and last to the end of 2020. However, compared to the previous survey on 19 March 2020 an increased optimism
is observed, both in terms of the time for the activity in the economies to rebound and the belief in the policy tools available.
• Governments all over the world, including Denmark, are introducing major aid packages to help companies and employees through the health crisis.
This will ease the severe and long-lasting impact of COVID-19 on the world economy. But the question is how much?
• Deloitte Economics will continue monitoring the impact of the Coronavirus in Denmark and globally.
For questions on the contents of this report, please contact:
Majbritt Skov Tinus Bang Christensen Peter Lildholdt
Director, Head of Deloitte Economics Partner Assistant Director
Mobile: +45 30 93 54 71 Mobile: +45 30 93 44 63 Mobile: +45 40 35 25 36
maskov@deloitte.dk tbchristensen@deloitte.dk plildholdt@deloitte.dk
Disclaimer: The information in this document is intended for knowledge sharing only.
Coronavirus impact monitor – March 2020 Page 8 Deloitte Economics © 2020Appendix Coronavirus impact monitor – March 2020 Page 9 Deloitte Economics © 2020
Impact on financial markets
Equity market volatility at highest level since the global financial crisis
VSTOXX Index
• The VSTOXX index measures 30-day implied volatility of
100
the EURO STOXX 50 equity index and reflects investors'
90
uncertainty abut future equity market moves.
80
• As shown in the graph above, the Coronavirus induced
Volatility index
70
an increase in volatility to a level comparable to that Coronavirus induces
60 volatility increase
experienced during the global financial crisis in 2008,
50 comparable to GFC
underlining investors’ recession fears.
40
30
20
10
0
1-Jan-08 1-Jan-10 1-Jan-12 1-Jan-14 1-Jan-16 1-Jan-18 1-Jan-20
iTtraxx Europe Crossover Index: Default probability
• The chart opposite shows the development in the
%
implied default probabilities based on the 5Y iTraxx
70
European Crossover spread of Credit Default Swaps and
61.7%
an assumed recovery rate of 40%. It measures default 60
Default probability in %
probabilities on a portfolio of sub-investment grade
50
corporate debt in Europe. 43.1%
40
• With a current default probability of about 43%, we are
at the highest level since the European debt crisis, but 30
still below peak financial crisis levels.
20
• As the index reflects cost of debt, any refinancing will
10
be costly for leveraged companies, even though interest
rates are close to record low. 0
Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Jan 2018 Jan 2020
Note: 1) VSTOXX as volatility index of EURO STOXX 2) Default probability calculated based on 5Y iTraxx European Crossover CDS and a recovery rate of 40%
Sources: Thomson Reuters Eikon
Coronavirus impact monitor – March 2020 Page 10 Deloitte Economics © 2020Impact on corporate sector
Coronavirus outbreak has taken its toll on business sentiment and M&A activity
Eurozone PMI Composite Index: Business sentiment
• Due to the Coronavirus outbreak, the Eurozone
70
economy suffered an unprecedented collapse in
65
business activity in March as the coronavirus outbreak
intensified. 60
HIS Eurozone Index
55
• There is usually a relatively good link between economic
growth and this measure of business sentiment: The 50
reading is indicative of GDP slumping at a quarterly rate 45
of around 2%
40
35
30
25
Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Jan 2018 Jan 2020
Danish M&A activity by quarter
• M&A activity in Denmark has been declining during
150 350
2019.
293 301
291
277 281 275 278 300
• Activity during Q1-2020 is on track to reach the lowest 125
Total annual deal volume
262 259
# of deals in Denmark
254 255
activity level observed since 2014 229 232 250
100 215 92 94
197
75 78 76 78 76 75 200
75 71 70
65
60 57 57 58 58 59 150
56 53 56
52
50 41 43
39 36 100
25 50
0 0
2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Annual deal volume Deal volume Denmark
Note: 1) IHS Markit Eurozone PMI Composite Output Index 2) Cut-off date for M&A activity in Q1 2020 is 25 March, 2020 3) Annual deal volume is calculated based on a 4 quarter rolling window
Sources: Thomson Reuters Eikon, Mergermarket
Coronavirus impact monitor – March 2020 Page 11 Deloitte Economics © 2020Industry outlook
Industry | Financial Services (1/2)
Market cap. across the financial
Industry impact industry before and after “Corona”1
Since the GFC in 2008 regulators have focused efforts on shoring up the solvency of financial 100
Nordic Insurers 80
institutions. In particular changes in Basel, Solvency and Accounting regulations will likely have Nordic Banks 76
100
Danish Savings Banks 100
74
prepared the Financial Services Industry to withstand the economic shock created by COVID-19. Nordic Consumer Banks 100
55
Nordic DCAs 100
While the industry may be more resilient, the short to medium term impact on the industry will be 41
100
Nordic AMs 72
significant. The immediate impact of the crisis on market capitalisation of FS segments is stark.
20/01/2020 25/03/2020
Highlights from the industry
Banking Insurance
• The continued low base rate environment and continuing increases in the • Claim rates for both Life and P&C insurers will likely increase placing
cost base of banks (primarily IT and compliance) has left some smaller strain on: 1) claims handling resources; and 2) technical reserves. The
players with limited headroom to withstand a vast increase in loan losses. decline in equity markets will adversely impact pension providers who
continue to pay out on guaranteed pension products.
• Government support has been authorized to compensate small
businesses for loss of revenue and fixed cost expenses along with other • The medium term implication on customers is an increase in premiums
initiatives, in order to withstand the anticipated increase in non- paid for coverage.
performing loan stock.
• Based on recent combined ratios, any under-reserved insurers may find
• The duration of the economic slowdown from social distancing measures trading difficult.
places an increased risk on loan losses and the associated capital
resources. Combined Ratio
100
Common Equity Tier 1 Ratio Total Capital Ratio 93
30% 30% 95 91
89
20% 20% 90 87
10% 10% 85
0% 0% 80
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2017 2018
Denmark Sweden Norway Denmark Sweden Norway Nordic countries (excl. Sweden) Other EU countries
Source: Annual reports from the largest banks in Denmark, Sweden, and Norway Source: OEDC Global Insurance Statistics (data for 2019 is not yet available)
1) Index 100 = 20 January 2020
Coronavirus impact monitor – March 2020 Page 12 Deloitte Economics © 2020Industry outlook
Industry | Financial Services (2/2)
Highlights from the industry
Asset Management Debt collection platforms
• The industry will suffer an immediate top line shock as a result of the • Debt collection income is likely to be impacted by a) a slowdown of
decline in equity markets. In addition, investor sentiment may lead to a collections; and b) the downward revaluation of owned debt portfolios. In
reallocation of funds to “safer” asset classes which may further impact addition, current funding structures and relevant bank covenant are likely
some market participants. to be placed under pressure.
• Market perception of both fee
• However, there is a potential opportunity as a result of the anticipated
levels and relative “safety” will be
Average asset allocation among increase in non-performing loans from other financial services players
important in the short term as
Danish pension funds alongside consumer facing corporates.
will be solid investment
strategies. Other
Real Estate
1%
9%
• Danish pension funds hold their
largest positions in fixed income,
Alternative
and the introduction of economic Investments
stimulus packages by major 17%
economies, seems to have
Bonds
slowed the drop in equities and 49%
other markets for the time being. Equity
This strengthens the overall 24%
prospect of markets recovering in
the second half of 2020.
Source: Pension funds home pages
Economic outlook
The longevity of the COVID-19 crisis is unknown. The financial services industry faces a range of eventual implications, including both market consolidation
and corporate failures. Regardless, it is likely financial services players will need to reshape their cost base and strategy due to the impact of a decrease in
top line revenue and the implication of the crisis on the underwriting of both insurers and lenders.
1) Index 100 = 20 January 2020
Coronavirus impact monitor – March 2020 Page 13 Deloitte Economics © 2020Industry outlook
Industry | Technology, Media & Telco
Equity markets: S&P Global 1200 sectoral indices
Industry impact 110
As of
• The technology, media and telecommunications (TMT) sectors have 100 March 25, 2020
held up relatively well as they are less exposed to a near-term
contraction in consumer spending. 90
82.8
80 80.9
• However, the TMT sector is still facing severe challenges, with many 79.6
companies being affected by supply chain disruption, manufacturing 70
and demand issues. 01-01-2020 15-01-2020 29-01-2020 12-02-2020 26-02-2020 11-03-2020 25-03-2020
Information technology Telecommunication Media & Entertainment
Highlights from the industry
Challenged sectors Neutral/uncertain sectors Potential winning sectors
• Sector: IT Consulting and Services • Sector: Enterprise software. • Sector: Communication software & infra.
• Trend: Impact on existing projects due to • Trend: Demand for new solutions to weaken. • Trend: Societal shift to online channels as
travel restrictions, challenging the time and as businesses are disrupted, however social distancing have increased, creating
materials model, and impact on future sales. companies are likely to stick with current new forms of communications.
• Examples: DXC Technology Company, solution to recover and grow. • Examples: Zoom Video Communications,
Capgemini, Atos, Cognizant Technology • Examples: SAP, Oracle Corporation, Microsoft (Teams), Slack Technologies.
Solutions Corporation. Microsoft, Salesforce.com. • Other sub-sectors: Cyber security, Cloud
• Other challenged sectors: Media & • Other sub-sectors: Technology Hardware, infrastructure, Home Entertainment, Video
Entertainment, Semiconductors & Entertainment production (e.g. movies). Games.
Equipment.
Economic outlook
• Forrester has revised its IT spending forecast downward with a best case scenario the global tech market growth slowing to ~2% in 2020 and if a full-
fledged recession hits, there is a 50% probability that global tech markets will decline by 2% or more in 2020.
• Software spending is the subsector expected to show highest growth, while computer equipment as well as IT consulting and systems integration
services spending are expected to show weaker growth (potentially slight decline).
Source: S&P Capital IQ, Forrester Research (March 2020), RBC Capital Markets (March 2020)
Coronavirus impact monitor – March 2020 Page 14 Deloitte Economics © 2020Industry outlook
Industry | Real Estate shares prices and interest rates have stabilisied (for now…)
STOXX 600 Real Estate index and selected company indexes
Industry Impact 150
• Sectors such as Retail, Leisure, Hospitality, and 140
Transportation are especially hit by the COVID-19 130
Stock price index
outbreak. 120
• However, demand for properties suited for logistics will 110
increase, as online trading will be boosted by the crisis. 100
90
• Mortgage bond interest rates have stabilised within the
last week. 80
70
• We expect the slowdown of trades with residential and
60
commercial properties to continue for a while.
50
• Ongoing development projects will continue, but 01-01-2020 15-01-2020 29-01-2020 12-02-2020 26-02-2020 11-03-2020 25-03-2020
currently less appetite for new projects among investor.
STOXX 600 Real Estate Patrizia AG Jeudan A/S
Collier International Agate Ejendomme Park Street Nordicom
Long maturity mortgage bond interest rates (RD, 30 Yrs, 1.5%)
Real Estate Outlook
• Remote working to become a more permanent feature
Yield to maturity in %
of our lives.
• With more online grocery shopping, it will impact how
retailers operate, with a higher demand for warehousing
space.
• With disruption of supply chains, businesses will shift
towards reshoring or near-shoring.
Sources: Realkredit Danmark, Thomson Reuters Eikon, Capital IQ
Coronavirus impact monitor – March 2020 Page 15 Deloitte Economics © 2020Industry outlook
Industry | Industrials
Industry impact
• Global manufacturing contracted during February 2020, as COVID-19 disrupted supply chains and hit demand.
• Coronavirus continues to be a critical supply chain risk for many European companies, as closed factories and transport restrictions increase average delivery times.
• Factory jobs have been cut globally at the fastest rate since August 2009, as companies scale back production capacity in line with falling demand and reduced supply.
• Chinese factories are reopening and are gradually restoring production levels.
Efforts to contain COVID-19 impact short-term manufacturing output and demand
Manufacturing PMI Index as of 20 February 2020 • The Chinese Manufacturing PMI declined at record pace, with a
60
drop of 10.8 points in February 2020, as factories shut down in an
Contraction Expansion
55 effort to contain COVID-19.
50 • With factories reopening, China’s supply is getting closer to
restoring demanded production levels.
45
• Several Danish companies, including Danfoss, Vestas, and
40
Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Rockwool, have reopened their Chinese factories.
USA Denmark Euro area China
• Preliminary March PMI figures for the Euro area and the US
The manufacturing PMI index is a weighted average of five survey variables: indicate that the shut down of factories is starting to hit industrial
New orders, output, employment, suppliers’ delivery times, and inventories of purchased inputs manufacturing in these areas too.
Economic outlook
• Top priorities for industrials are to reduce operating costs, review spend, ensure that financing remains viable and secure a continued supply.
• Supply from China is gradually increasing, with production facilities coming back on-line, minimising the supply chain risks for European companies.
• Many European factories will remain shut down or running on less capacity until the COVID-19 spread in Europe has stabilised.
Sources IHS Markit, Caixin, DILF
:Coronavirus impact monitor – March 2020 Deloitte Economics © 2020
Page 16Aid packages
Country Size of aid Type of aid Target groups
• Liquidity measures
• SMEs
• Loan guarantees
• Family-owned
• € 38bn (9.5% • Tax deferrals
Austria companies
of GDP) • Labour subsidies for companies that have to reduce working hours
• One-person
• Aid for one-person and family-owned enterprises, tourism and cultural sectors
enterprises
• Safety net for small businesses
• Approx. CAD • Direct support • Consumers
Canada 82bn (approx. • Deferral of tax payments from firms and individuals • Corporates
3.5% of GDP) • Liquidity support for businesses • Employees
• Approx. CNY
1.25trn
China • Tax relief • Corporates
(1.25% of
GDP)
• Loans payments will be delayed and distributed in several smaller payments
over the next months (this is a measure supposed to help small and middle
Colombia • N/A size companies) • SMEs
• Extra guarantees from Central Government (through a Special Fund) to
support extra loans needed by small / medium size companies
Coronavirus impact monitor – March 2020 Page 17 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• Release of countercyclical buffer
• Self-employed
• Government guarantee for some corporate debt
• Certain sectors
• Salary compensation scheme running for three months covering up to 75% of
• Employers facing
an employee's salary (max DKK 23t per month). Have to warn lay-offs of more
shortage of orders
than 30% or 50 employees and agree not to lay-off employees while receiving
• Fiscal: DKK and fewer customers
compensation
56bn (2.4% of • Applicable for all
• Compensation of fixed costs
GDP) companies, but
• Aid to Scandinavian Airline System
Denmark target companies
• Credit: Up to • Aid to retailers etc. who have been forced to close stores at least until March
who have revenue
DKK 225bn 30th
decline more than
(9.8% of GDP) • Postponed three months VAT payments for large companies with revenue
40%
more than DKK 50m. Forecast suggest liquidity is boosted by DKK 35bn
• Airlines
• Compensating for cancellation of larger events
• Retailers
• Postponed labor market contributions and payroll forecasted to improve
• Large companies
liquidity by DKK 90bn
• Events
• Corporation tax deferred
• € 27m in extra spending on health care and € 73m to stave off acute corporate
funding pressures
• Deferred corporate tax payments
• € 3bn (1.3% • Corporates
Finland • State Pension Fund will buy € 1bn of commercial paper
per GDP) • SMEs
• The government will increase capacity to guarantee loans to SMEs
• Business Finland will provide emergency aid to companies in worst affected
industries
Coronavirus impact monitor – March 2020 Page 18 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• € 1bn solidarity fund to help affected businesses
• Extended deadlines for social security and tax payments, credit guarantees
and sick leave payments for caring for children
• Affected businesses
• € 45bn (1.9% • Short-time working scheme, under which state will cover entirety of lost
France • SMEs
of GDP) salaries
• Freelancers
• Small companies can have utility (water, rent etc.) bills suspended and
suspension of their taxes and social charges. € 1,500 subsidy for all SMEs and
freelancers
• Solidarity fund
• Approx. € • Liquidity measures for affected companies (credit & state guarantees for €
• Affected companies
150bn (4.4% 93bn but up to € 500bn)
• SMEs
Germany of GDP), but • Easier access to short-term work compensation
• Self-employed
implicitly open- • Deferred tax payments for companies
persons
ended • Small companies and self-employed persons (e.g. artists) are to receive direct
grants of up to € 15,000 over three months
• Help for workers facing temporary layoffs
• Boosting guarantee fund for SME loans
• Moratorium for business and personal mortgage repayments
• SMEs
• One-off payment of € 500 for self-employed and cash bonus for Italians still
• € 26bn (1.5% • Corporates
Italy working, financial support to families
of GDP) • Employees
• Some regions offer suspension for up to six months of certain loans
• Self-employed
• Establishment of a guarantee fund for loans to support working capital and a
fund for the granting of repayable loans
• Funds for redundancy programs
Coronavirus impact monitor – March 2020 Page 19 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• SMEs
• Freelancers
• Credit lines for SMEs (particularly tourism) • Self-employed
• Approx. USD
Japan • Compensation for freelancers, self-employed, non-regular workers & parents • Non-regular workers
12.6bn
burdened by school closures and parents
burdened by school
closures
• Wage subsidies
• Permanent lift in welfare payments
• Reintroducing depreciation deductions
• Lifting the threshold for payment of provisional tax
• Initial $ 500m boost for health services
• $ 5.1bn for wage subsidies (capped at $ 150k per business for a total of 12
• Fiscal relief of weeks, who can show a 30% month-on-month decline in revenue cf. 2019)
• Corporates
NZ$12.1 bn, • $ 2.8bn income support measures including an immediate increase in current
New Zealand • Employees
worth 4% of weekly benefits
• Airlines
GDP • $ 2.8bn changes to business tax rules to free up cash flow, e.g, accelerated
depreciation
• $ 126m in COVID-19 leave and self-isolation support
• $ 100m for workforce redeployment
• $ 600m airline/aviation support package (noting Air NZ is 52% government
owned)
• The aid adds to existing (from Dec) infrastructure package of same size
Coronavirus impact monitor – March 2020 Page 20 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• Government loan guarantee specifically aimed at SMEs (NOK 50bn) and
reintroduction of Government Bond Fund (NOK 50bn)
• Corporate deficits can be written off against tax on surpluses from previous
• Fiscal: Open- years
ended but • Postponement of wealth tax for owners of corporates now running deficits • SMEs
scheduled NOK • Temporary tax relief for airlines, drop in both passenger tariffs and airport • Employees
16.5bn (0.5% tariffs • Self-employed
Norway of GDP) • Reduction of employee’s tax by 4 pp. for 2 months • Freelancers
• Credit: NOK • Other benefits, i.e. government pays for the first 20 days for temporary lay- • Corporates
100bn (3.3% offs • Airlines
of GDP) • Allows SMEs to take loans up to NOK 50m with term up to three years. The
state will guarantee for 90 % of the loan value.
• SME package available to those funded through ordinary banks (i.e. not
alternative lending)
• € 9.2bn (4.3% • Credit lines for affected businesses and tax deferrals
Portugal • Corporates
of GDP) • Possible moratorium on capital and interest payments
• Approx. €
117bn in public • State guarantees
investments • Direct aid to firms affected by the lockdown
• Corporates
Spain • Private • Private investment
• CMEs
investments is • Deferred tax payments for SMEs
set to add € • Suspension of mortgage payments
83bn
Coronavirus impact monitor – March 2020 Page 21 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• State guarantees
• Government facilitate increased lending to Swedish companies, especially
• Corporates
• SEK 300bn SMEs
Sweden • SMEs
(6% of GDP) • Businesses will be offered the opportunity to have tax payments for the period
• Airlines
January to March repaid. Repaid taxes can be kept for a period of a year
• Aid package aimed at helping companies where CHF 8bn is earmarked to fund
the imposition of short-time work at firms; other tranches for hardship loans
• Approx. • Corporates
Switzerland and to support specific sectors
CHF10bn • SMEs
• Special guarantee scheme to support SMEs in liquidity difficulties due to
COVID-19
• Approx. €10bn • Extension of subsidising working hours reduction
• Employers
to €20bn • Extra income support for freelancers
• Employees
(roughly 2 to • Easing deferral of payment for taxes and fines
• Freelancers
3% of national • Extension of government guaranteed company-financing
• Self-employed
debt) • Interest discount on microcredits for SME and starters
• Corporates
The Netherlands • Temporary guarantees for food- and agricultural companies
• If necessary, • SMEs
• Temporary stop on local taxes (municipalities)
additional • Specific sectors, e.g.
• Compensation scheme for specific sectors
funds up to food- and
• Revision of tax applications for 2020
€90bn can be agricultural
• Small businesses can get a € 4t allowance directly
released companies
• Self-employed can claim a minimum 3-month allowance
Coronavirus impact monitor – March 2020 Page 22 Deloitte Economics © 2020Aid packages
Country Size of aid Type of aid Target groups
• Government-backed loans and guarantees
• GBP 312bn • CBILS (Corona Business Interruption Loan Scheme) of up to £ 5m to help firms • Corporates
United Kingdom
(14% of GDP) manage cash flows. Terms from 3 months to 10 years for term loans and asset • SMEs
finance. The loans are interest-free first year
• Emergency spending package
• $ 500bn for large corporations
• USD 2,000bn • $ 367bn loan program for small businesses
United States of • Large corporations
(approx. 9% of • $ 150bn for assistance to state and local governments
America • SMEs
GDP) • $ 340bn supplemental package to combat the outbreak of COVID-19, including
$ 117bn for hospitals, $ 45bn for FEMA's disaster relief fund and $ 11bn for
vaccines, therapeutics and other medical needs
Coronavirus impact monitor – March 2020 Page 23 Deloitte Economics © 2020This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. About Deloitte Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com. Deloitte Touche Tohmatsu Limited Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more. © 2020 Deloitte Statsautoriseret Revisionspartnerselskab. Member of Deloitte Touche Tohmatsu Limited.
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