Report
Temporary loss of growth due to coronavirus crisis: The problem is to prevent a liquidity crisis from becoming a solvency crisis
The most likely outcome of the coronavirus crisis is that it will lead to a temporary loss of growth in OECD countries. Companies will therefore be threatened by a liquidity crisis: their revenues will fall while their spending (salaries, interest on debt) will be largely unchanged. In order to prevent a temporary loss of growth from becoming a permanent loss of growth, companies’ liquidity crisis must not become a solvency crisis, which would lead to a wave of bankruptcies. Companies must therefore be helped to withstand the liquidity crisis: Governments must lower taxes and therefore accept a higher fiscal deficit; Banks must to be able to lend more to companies to compensate for their revenue losses, which will require central banks to inject liquidity into banks' balance sheets, possibly conditional on lending while possibly modifying banks' prudential rules.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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