"ADB has published a new article The global economy is on the brink of a recession as the coronavirus disease (COVID-19) pandemic has severely impacted businesses, jobs, and incomes. The pandemic-induced economic slowdown is driven by both the supply and demand sides of the economy. As many economies have imposed lockdown measures, factories have been closed, supply chains disrupted, and productivity has fallen, with mounting economic losses.
Job losses or reduced working hours due to quarantine or illness cut household incomes, lowering consumption. Firms’ incentives to invest are also weakened as they face the elevated uncertainty.
Financial fragility in the banking system is thus one potential consequence of the pandemic. A pandemic-induced economic slowdown implies lower corporate earnings and higher unemployment, exacerbating the debt service burden for both firms and households. Many corporates and small and medium-sized enterprises, from airlines to retailers to restaurants, face risk of default. Growing job losses also imply a rise in household debts and mortgage defaults on the horizon. The banks that lend to them will likely suffer loan losses and rising nonperforming loans (NPLs)."
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Source: ADB