Moody's cuts India 2020 GDP forecast to 2.5%; global growth to dip to -0.5%

Moody’s Investor Service (Moody’s) reduced its economic growth forecast for India to 2.5% for calendar year 2020 (CY20), although it expects growth to rebound to 5.8% in 2021 (CY21). Globally, it expects negative 0.5% GDP growth in CY20 before rebounding in CY21.

The downward revision of the growth rates of CY20 comes in the context of the coronavirus pandemic (Covid-19) which has paralyzed economic activity not only in India, but worldwide. Moody’s expects the growth of G20 economies to experience an unprecedented shock in the first half of 2020 and to contract as a whole, before recovering in 2021.

“We have revised down our growth forecasts for 2020 as the growing economic costs of the coronavirus shock and the political responses to tackle the recession become clearer.” We now expect real G-20 GDP to contract by 0.5% in 2020, followed by a recovery to 3.2% in 2021, “said Moody’s in a note. last year, before the emergence of the coronavirus, it had set the growth rate of G20 economies at 2.6% in 2020. (See the table below)

That said, the agency expects the policy measures to continue to grow and deepen, as the consequences of the shock in terms of depth and duration become clearer. However, the downside risks to growth remain significant, said Moody’s.

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India's Main Exports 2020

“The sharp compression in demand over the next two to four months is likely to be unprecedented, as data from China for January and February shows. In addition, as expected, the indicators of the purchasing managers index for the euro zone confirm that a sharp contraction is already underway. In addition, the widespread loss of income for businesses and individuals across countries will have a multiplier effect throughout the global economy, “said Moody’s.

Over the next few months, Moody’s expects job losses in all countries to accelerate. According to him, the speed of recovery will depend on the extent to which job losses and loss of income for businesses are permanent or temporary.

“Even in countries where governments are able to provide support through large and targeted measures, some small businesses and vulnerable people in less stable jobs are likely to face serious financial distress,” he said.

Strong rebound in China

The agency has set China’s real GDP growth at 3.3% in 2020, followed by a strong rebound of 6% in 2021. In the other emerging countries (ME), a sharp reduction in GDP in the second quarter is also inevitable, says Moody’s, especially when strict containment measures have been imposed.

That said, the agency believes that the recovery in emerging countries will be relatively more moderate than in advanced economies due to a general lack of social safety nets, a weaker ability to provide adequate support to businesses and to households, and the weaknesses inherent in many large emerging countries. likely to amplify the impact of the shock.

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