An ‘unparalleled global recession’ is underway due to the disruptions caused by the outbreak of the deadly coronavirus pandemic and the resultant lockdowns, as per Fitch Ratings. On Thursday, it slashed India’s economic growth projections to 0.8% in the current 2020-21 FY.
In its Global Economic Outlook, Fitch Ratings said India’s gross domestic product (GDP) growth will slip to 0.8% for the year April 2020 to March 2021 (FY21) as compared to an estimated 4.9% growth in the previous fiscal.
Growth is, however, expected to rebound to 6.7% in 2021-22.
The rating agency predicted two consecutive quarters of contraction or negative year-on-year growth in current fiscal — (-)0.2% in April-June and (-)0.1% in July-September. This compares to 4.4% estimated growth in January-March.
Growth is expected to rebound to 1.4% in the last quarter of 2020 calendar year.
As per the reports, the slump in FY21 growth was mainly due to a projected fall in consumer spending to just 0.3% in FY21 from 5.5% a year back and a 3.5% contraction in fixed investment.
The agency has also made large cuts to global GDP forecasts in its latest Global Economic Outlook (GEO) in response to coronavirus-related lockdown extensions and incoming data flows.
“World GDP is now expected to fall by 3.9% in 2020, a recession of unprecedented depth in the post-war period,” said Brian Coulton, Chief Economist at Fitch Ratings.
This would be twice as severe as the 2009 recession, as per Coulton.
“No country or region has been spared from the devastating economic impact of the global pandemic,” the rating agency said.
The decline in GDP equates to a USD 2.8 trillion fall in global income levels relative to 2019 and a loss of USD 4.5 trillion relative to pre-virus expectations of 2020 global GDP.
Falling commodity prices, capital outflows and more-limited policy flexibility are exacerbating the impact of domestic virus-containment measures; Mexico, Brazil, Russia, South Africa and Turkey have all seen big GDP forecast adjustments.
“With China and India both now expected to see sub-1% growth, we expect an outright contraction in emerging markets (EM) GDP in 2020, a development unprecedented since at least the 1980s,” it said.
“We expect supply responses and a relaxation of lockdowns to help oil prices to recover in 2H20 from current lows, which are being exacerbated by storage capacity issues in the US and elsewhere”, it stated.