American financial services company Moody’s Investors Service on Tuesday (April 28) downgraded India’s GDP growth forecast in the calendar year 2020 to 0.2 per cent from its earlier projection of 2.5 per cent, released on March 27.
This is the second time Moody’s has slashed the growth projection drastically after the COVID-19 outbreak in India. On March 27 too, it had cut its growth forecast for the country from 5.8 per cent. It had also said the lockdown due to COVID-19 would affect segments like commercial vehicles and asset-backed securities.
In fact, the company has been slashing India’s growth forecast from the beginning of the year. On February 17, it had downgraded the 2020 growth forecast to 5.4 per cent from 6.6 per cent projected earlier.
However, Moody’s has projected India to grow at 6.2 per cent in 2021, which is higher than its March projection of 5.8 per cent. Even with a gradual recovery, the real 2021 GDP in most advanced economies is expected to be below pre-coronavirus levels, it said.
“India extended a nationwide lockdown to 40 days from 21 days, but relaxed restrictions in rural areas to facilitate agricultural harvesting in the second half of April. The country has determined that many of these areas are free of the virus. It also plans a phased opening of different regions while continuing to carry out identification and contract tracing,” Moody’s said.
Stating that the economic costs of the shutdown of the global economy are accumulating rapidly, the company in its Global Macro Outlook 2020-21 (April 2020 Update) projected that all G-20 advanced economies would contract by 5.8 per cent in 2020.
In November 2019, before the emergence of the coronavirus, the rating agency was expecting the global economy to grow by 2.6 per cent this year.
As per the update, China is projected to grow by 1 per cent in 2020 and 7.1 per cent in 2021, as against 6.1 per cent in 2019. India, China and Indonesia are the only three G-20 countries that are projected to grow in 2020, while the others will see a contraction, according to the report.
The US economy is projected to contract by 5.7 per cent, the UK by 7 per cent, Italy by 8.2 per cent, Japan by 6.5 per cent and France by 6.3 per cent. Moody’s said the economic costs of the coronavirus crisis amid the near shutdown of the global economy were accumulating rapidly.
The rating agency further said that it expects Brent spot price to average $35 per barrel and WTI spot to average $30 a barrel for this year. Oil prices will likely move up in 2021 as demand recovers along with economic growth. For 2021, we forecast Brent to average $45 per barrel and WTI to average $40 per barrel, it said.
(With agency inputs)