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COVID-19 to create a fragmented global economy: Moody’s


Moody''s Investors Service believes that the coronavirus pandemic may create a more fragmented and protectionist global economy with restrictions on trade, investment and technology transfers. This may benefit some Asian markets excluding China as companies will look to diversify their sources of supply. However, localization of production or reshoring that moves productive capacity out of the region to the US or the European Union will have negative effects for Asian producers, notably those in strategic sectors, the analyst noted.

Moody''s said as the global trade system becomes more regionally focused, each major region – Asia, Europe and the US – will likely have its own suppliers for strategically important products. This will lead to localization and reshoring of supply chains to Europe and the US. According to Moody''s, in a post-COVID world, ensuring supply security through enhanced supply chain robustness will become a key focus of governments and companies. The global trade system will become more fragmented, leading to less efficient, less just-in-time supply chains at the global level but an increase in regionally focused production, it said.