Table of Contents:
- INTRODUCTION
- PREFACE
- EXECUTIVE SUMMARY
- ECONOMY FACT SHEET (BEGINNING OF 2020)
- COMMERCIAL RELATIONSHIPS WITH CHINA
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- PRELIMINARY REMARKS
- RECENT FACTS
- FOCUS ON ITALY
- CORONAVIRUS IN BRIEF AND ITS EARLY EFFECTS
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- EVOLUTION OF THE CRISIS
- IMPACT OF THE VIRUS ON FINANCIAL MARKETS AND REAL ECONOMY
- SCENARIOS AND IMPACTS ON ITALIAN NON-FINANCIAL COMPANIES
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- PREMISES AND BACKGROUND
- ASSUMPTIONS
- SCENARIOS
- EVOLUTION OF KEY-FINANCIAL RATIOS IMPACTS ON RATINGS
- ANNEX
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- CERVED RATING AGENCY RATING SCALE
- SOURCES
- LIST OF EXHIBITS
INTRODUCTION
The World Health Organization’s declaration of the global emergency of the Coronavirus (hereinafter also called “COVID-19”) leads, among others, to relevant implications for the world economy, considering in particular the companies having significant commercial relationships with China. In the last weeks this aspect has contributed to increase the interest and awareness of the stakeholders about the expected evolutions of the health emergency, which is already causing dangerous effects in terms of human lives and other heavy discomforts.
The widespread of the disease is unfortunately following an exponential road: starting from China, several outbreaks have recently emerged in Italy, South Korea and Iran, and other countries in and out of Europe are putting in place hard countermeasures to tackle the situation.
Although at the moment the future development of the emergency is not predictable, a series of hypotheses and related impacts can be figured out with the purpose of expressing opinions on the potential impacts in particular on the domestic economy.
Cerved Rating Agency (hereinafter also called “CRA”), leveraging on its experience on the domestic market, submits this research paper aimed at estimating short and medium-long term impact of Coronavirus emergency on the Italian non-financial corporates.
It is worth to highlight that this research paper represents a preliminary analysis on the early effects of the disease on the Italian corporates that, at the time of writing, were experiencing a sensible daily increase of the cases verified, thus even more directly affecting the Italian economic fabric. For this reason, Cerved Rating Agency will monitor the situation and will consider the option to dedicate in the next months a specific study on the impacted companies and related connections.
PREFACE
The projections in this study reflect CRA’s opinion on the expected economic and financial trend of the Italian non-financial companies and their overall creditworthiness in case of occurrence of a range of hypothesised scenarios related to the Coronavirus emergency.
The document presents four distinct sections. The first section illustrates the historical series and trend of the main macroeconomic indicators showing the Global, European, Chinese and Italian economic conjuncture.
The second section focuses on commercial relationships of China with the rest of the World, evidencing the related supposed impact for Italian non-financial corporates. In this context, a specific focus is dedicated in the third section to the occurrence of the Coronavirus emergency and its direct and indirect consequences on the Italian economy.
The fourth section contains an estimate of the impact of the selected scenarios on the simulation portfolio1 represented by Italian non-financial companies; the final output is obtained through the application of quantitative and qualitative analyses which considered a set of underlying assumptions. The analysis evidences, inter alia, the most impacted sectors and their individual level of expected riskiness, according to the hypothesised scenarios. This section also shows an estimate of the expected evolutions (on average) of the most representative financial indicators, stressing the potential impact on the profitability and financial structure of the Italian non-financial companies following the application of the scenarios.
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