Moodys Slashes India GDP Growth To 2.5% In 2020, Expects Steep Fall In Incomes

Moody's Slashes India GDP Growth To 2.5% In 2020, Expects Steep Fall In Incomes

The slash in growth rates for FY20 comes in the backdrop of the novel coronavirus pandemic that has put brakes on all economic activities, not only in India, but across the world.

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On account of the increasing economic cost of the coronavirus pandemic, Moody's Investors Service on Friday cut its estimate of India's GDP growth during 2020 financial year to 2.5 percent from an earlier 5.3 percent.

Moody's said that India will witness a sharp fall in incomes which will bring down the domestic demand and the speed of recovery in 2021.

The agency, however, expects the growth to bounce back to 5.8 per cent in 2021. At the global level, it projects a GDP growth of -0.5 per cent in FY20, before reviving in FY21.

The slash in growth rates for FY20 comes in the backdrop of the novel coronavirus pandemic that has put brakes on all economic activities, not only in India, but across the world.

Moody's expects the growth in G-20 economies to witness an unprecedented shock in the first half of 2020 and then contract, before bouncing back in 2021.

"We have revised our growth forecasts downward for 2020 as the rising economic costs of the coronavirus shock and the policy responses to combat the downturn are becoming clearer. We now expect G-20 real GDP to contract by 0.5 per cent in 2020, followed by a pickup to 3.2 per cent growth in 2021," Moody's said.

In last year November, Moody's had pegged the growth rate for G-20 economies at 2.6 per cent in 2020.

"The severe compression in demand over the next two to four months will likely be unprecedented, as China's data for the months of January and February reveal. Also, as expected, purchasing managers' index indicators for the euro area confirm a sharp contraction is already underway. Moreover, the widespread loss of income for businesses and individuals across countries will have a multiplier effect throughout the global economy," Moody's said.

Moody's also expects massive loss of jobs in several countries over the next few months. The revival speed will be based on the extent of job losses and whether the loss of revenue to businesses is permanent or temporary.

"Even in countries where governments are in a position to provide support through large and targeted measures, some small businesses and vulnerable individuals in less-stable jobs will likely experience severe financial distress," it said.

The agency has also estimated the real GDP growth of China, the epicenter of the pandemic, at 3.3 per cent in 2020, followed by a massive rebound of 6 per cent in 2021.

In the other emerging economies, a sharp reduction in GDP in the second quarter is inevitable, Moody's says, pointing at strict containment measures imposed in some of them.

Also Read: COVID-19 Outbreak: RBI Extends EMIs Deadline By 3 Months, Slashes Repo Rate To 4.4%

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Editor : Shweta Kothari

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