Earnings before interest, tax, depreciation and amortisation (EBITDA) of the manufacturing sector globally is expected to see a drop by double digits in 2020 with single-digit increase in 2021 after the economic downturn caused by the COVID-19 outbreak, according to Moody’s recent manufacturing outlook report.
Moody’s outlook for the global manufacturing industry remains negative, as the report projected manufacturing sector EBITDA to drop by 13 percent in 2020 followed by 9 percent growth in 2021.
Furthermore, the report predicted a sharp decline in 2020 revenues and earnings, primarily affecting the second quarter of the year onward, followed by a partial recovery of business activity in 2021.
“This is a significant revision from our December 2019 outlook, when we forecast flat to 1 percent EBITDA growth for 2020 in anticipation of a general softening of overall manufacturing demand in a weakening industrial environment,” reads the report.
The sector, according the report, is in significant risk because of COVID-19’s harsh impacts on the global demand, production and supply chains.
The operating environment as well is expected to be highly uncertain for the remainder of 2020 for many companies, according the report, as the 2020 downturn is crisis-driven, hitting the sector quickly and without time to accurately assess the implication that COVID-19 will have on demand and products.
As the economic costs of the near shutdown of the global economy mount, Moody’s also lowered its forecasts for GDP growth globally, projecting G-20 GDP to decline by 4 percent in 2020, and only gradually recover in 2021.
For many countries, the level of GDP at the end of 2021 is expected to still be below pre-COVID-19 levels, while further declines are expected in advanced economies in 2020, with US GDP to contract by 5.7 percent and pronounced declines of 6.5 percent are projected in both the Euro area and Japan, according the report.
It also expected GDP to fall by 1 percent in G-20 emerging markets in 2020, while China's GDP growth is expected to slow down to 1 percent in 2020 before resuming stronger growth of 7.1 percent in 2021.