Corona Effect: $ 12 trillion impact on world trade is likely to reduce capital costs

Washington, Ta. 23 March 2020, Monday

American companies fear an estimated $ 3 trillion hit due to the coronavirus, a report said. It is possible for US private and government companies to lose an estimated $ 3 trillion at this stage. This is a horrible reduction. If these damages are not minimized, the impact will be long-lasting. Considering the impact Corona is having around the world, it is likely to have a $ 3 trillion impact on world trade, the report noted.

Against this backdrop, American companies may have to cut their capital costs by $ 2 billion. Which accounts for about four percent of its gross domestic product. In addition to capital expenditures, US companies may have the opportunity to reduce $ 2 billion in costs behind buybacks and mergers and acquisitions, which is expected to be about 5 percent of its GDP. As a result, there will be forced employment cuts.

The report noted that estimates of the movement of equity markets, how much the demand could be maximized, and the impact of the decline on American companies' earnings were estimated.

Without a fiscal or financial intervention, the $ 5 trillion mark could mean the US GDP declining by more than 5 percent this year. We are seeing a decline of more than 5 percent in the second quarter, compared with the final level of 8, the Bridgewater report said.

The growth rate of American companies is also expected to be as low as 5 percent in the second quarter. This will cause most companies to lose their cash and cash on balance sheets. In such a case, the debt burden of the companies may increase. Many companies have also expressed concern about going to default.

The report also states that the future of the markets will depend on how the governments of different countries can handle this problem. By estimating the situation, the central banks of several countries have taken steps to ease the monetary policy. In the US, interest rates have fallen to near zero.