Moody’s Investors Service said on Thursday that the credit downturn arising out of COVID-19 will be short-lived, but most economies will not return to pre-pandemic activity levels until 2022. 

In the year since the World Health Organization (WHO) declared COVID-19 a pandemic on March 11, 2020, the virus has disrupted the global economy and triggered a credit downturn accompanied by a spike in bond defaults. 

“The credit challenges arising from COVID-19 have been substantial, but the credit downturn likely will be relatively short-lived. Risks remain more significant for the sectors most vulnerable to restrictions on their normal activities,” Moody’s has said in a global report. 

Stating that most economies will not return to pre-pandemic activity levels until 2022, Moody’s said it expects a slow and bumpy global recovery, and uncertainty around the macroeconomic outlook remains much higher than usual.

Policy actions will continue to support economic activity and financial markets after the pandemic has eased, it added. Policymakers will continue to support economic activity long after the pandemic has faded, in some cases for years, Moody’s has said. 

Moody’s expects the incidence and prevalence of the pandemic to decline gradually over the course of this year as vaccination numbers rise. In turn, this will allow governments to ease lockdown measures gradually. However, a residual level of COVID-19 will likely persist over time, raising the prospect of global pockets of risk in regions where vaccination progress is slow.